Thursday, June 20, 2013

Profiting from market downtrends

Trend followers and their performance tend to stand out from the rest of the trading community during a severe downtrend. There are reasons for this. Firstly, they simply follow the direction in the market.

Secondly, they avoid trying to pick a bottom in a stock or instrument. Finally, they also know when to exit a position and avoid losing the bulk of their profits.

2008 was a classic example of this, and we are starting to see this now in markets like gold and silver. Every day you can read differing opinions from traders, market commentators or brokers about why a market is oversold, or is available to buy at a bargain price. And as the trend progresses against them, other ways will be found to justify their previous opinion. If not, they stand to lose face in the eyes of the people who follow their words.

During market downtrends, rallies tend to be more violent. In October 2008, the Dow rose by more than 1,000 points in one session! Yet, the trend was still clearly down. Within a few weeks, the Dow was back at new lows.

The market is never wrong. It does not pay attention to any opinion or prediction. Make sure you pay attention to the one metric which can help you make money - price.

Trend following helps people achieve this. You too can profit from applying such a method to your own trading. Do you want to be in the profitable minority when the next major downtrend comes?

If you want to know how to do this, then why not sign up for some 1-2-1 training, or join our mentoring programme?

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