Yes, "the trend is your friend," or MOMO counts, as traders know (pace EMH).
Several people working for the hedge fund AQR Capital Management have a working paper which looks at trend following strategies over about a century. It finds they're generally very profitable, which is surprising, I guess, if you're an EMH nut and simply can't muster the imagination required to believe that markets contain identifiable momentum.The Physics of Finance
How to consistently beat the market -- follow trends
Mark Buchanan
1 comment:
This is another example of a useless piece of trading/investing advice that has become like a well-worn soundbite, which causes people to lose.
"Trade the trend" is meaningless, devoid of real information. It's this kind of faux axiomatic, jingoistic, "advice" that causes people to consistently lose.
You cannot consistently beat the market by trading a trend. what is a trend, anyway? It's a totally subjective concept: one person's trend may another person's randomness.
It totally leaves out the concept of time, which is a crucial element.
Moroever, it says nothing of behavior, i.e. what do you do when that trend goes against you? Or when do you know that it has reversed and you are now on the wrong side? When will you know that? How do you know that?
Terrible, terrible advice and I explain in detail in my course why it's stuff like this that kills people.
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