Trading is all a manner of taking a position because you believe the odds are on your side and that it will move in your favor and you will make money.
That is what the stock market is all about whether you are a value investor, swing trader, or a momentum trader. The reason trading works is that all traders see charts differently, a swing traders resistance is a momentum traders buy signal for a breakout. A value investor’s buy point is a trend followers short sale target.
The market goes up the market goes down, and traders are along for the ride.
What is the best bet? I believe the best bet is that markets will trend. Trend followers made money in the crude oil run of 2008, the internet bubble of 1999, they made a killing recently in gold and silver. When the financial panic hit in late 2008 they made double digit returns while investors got clobbered. Some short term trend followers even have systems that catch the whole run up and then the whole trend back down.
Many of the world’s top money managers are trend followers, they produce steady returns and grow capital over the long term. While their systems differ they have core similarities:
- They trade multiple markets based on price.
- They have methods to determine a market’s current overall trend.
- Risk is carefully controlled on each trade position.
- They trade defined systems and stay away from predictions and opinions.
- Winning positions are allowed to run until they reverse.
Many times I have looked like a genius by simply following a trend that the majority thought was way over done but it ran another 10%, at other times I went to cash during volatile times and just sidestepped a wild market that cost people a lot of money.
For me the best bet is that the market will have trends, and I will be positioned to profit from them when they happen wherever they may be.