But, also a reason why trend following has likely worked so well. The institutions just can’t hide their footsteps and trends are being magnified.
History shows that nothing lasts forever and this great run for trend followers in the stock market, including me, will likely not continue. Who is to say when though…
I’ve discovered two wonderful systems that I think your readers should know about. I divide my money into two equal piles to invest in both systems. One is called Momentum and the other is called Reversion to the Mean (RTM).
When a stock goes up my Momentum System issues a buy signal so I go long with one pile of money. Similarly the RTM System logic issues a sell signal so I invest short with the other pile of money. It’s important to keep both systems in total balance so as not to bias yourself.
In my experience no matter which way the stock goes you have a winning bet, except for commission costs which can’t be helped. If your broker allows it be sure to leverage as much as possible so you can increase your results.
But parables aside it’s amazing how easily I can talk myself into either side of this logic (momentum or rtm). They each seem to make so much sense that the trick is to know when is the right time to switch on that part of your brain!
p.s. posted from my cell please excuse any formatting or mental lapses which of course never occur when I am at my desk!