Staying with the trend

I hear a lot of people talk about finding the bottom of a crash or finding the top of a rally, particularly this rally we have recently been having.

There is always news out there somewhere that a trend will not continue for one reason or another, but sometimes it is best to ignore all the noise out there and just go with the trend. 

There are many reasons to just hop on board and ride a trend regardless of what the noise thinks.

1.       The Markets are hard to predict

The markets are hard to predict.  That is why there are only a handful of people who have ever pinpointed the exact tops and bottoms of a market, and those people are often wrong many more times than they are right.

Instead of trying to find the exact bottom (or top) it is much more profitable to ride the trend and let the market tell you where it is going.

2.       If it Works Go With it

The markets are irrational more often than not.  If you find a river that is flowing uphill you don’t argue about how it doesn’t make sense and try to paddle your boat against the current.  Instead you ride the current uphill because that is the only way you will get somewhere.

If it is working don’t ask when it will stop, just go with it until it doesn’t work anymore.

3.       Can Cut Your Losses

If a trend ends you can always cut your losses short and move onto the next trade.  You don’t need to stay through all the ups and downs and hope that in the long term everything will work out okay.

Instead you can ride it while it goes up, but when it starts to go down you can get out and find a better trade elsewhere.

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