To Trend or Not to Trend
by Ray Rondeau
It is obvious that markets change and markets evolve. Investors who accept this as reality and adjust their approaches accordingly put themselves in a better position to succeed.
Like seemingly everything today, markets and their characteristics are changing at an ever-increasing pace. One of the more apparent changes is that we seem to be in an endless series of boom/bust cycles. These “bubbles” are being formed by a continuous revolving series of overextended price trends.
An investor may attribute these changes to multiple factors, including globalization, technological advances, the Internet, constant media coverage, increases in automated high frequency trading or the growing amount of hedge fund assets. New investment vehicles designed to allow individual investors to short and/or leverage (while staying long) is also a likely contributor. Add in ultra-low commissions and the fact that an investor can change his entire portfolio with a few clicks of a button, and it is easy to see why markets seem to be trending longer and wider than at any point in history.
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