So, the markets have clearly spoken this week. New highs have been made in many of the major indices - some of which are at either all-time or multi-year highs. The trend is therefore upwards.
The reasons or catalysts are irrelevant. Price is giving you a very clear signal of which way the markets are going, and the direction in which you should be looking to trade.
No doubt there will be plenty of traders saying that the markets are overbought, the new highs have been made on low volume, etc. Well, if they want to go short, that's fine by me (and other trend followers).
Remember the words of Larry Hite in Market Wizards:
"When I was a kid and got my first motorcycle, I had an older friend who would always get into fights. He told me, "Larry, when you are on a motorcycle, never argue with a car. You will lose." The same lesson applies to trading: If you argue with the market, you will lose."
"No matter how many people tell you why the market shouldn't be that high, or why nothing has changed, the mere fact that price is at a new high tells you something has changed."
"I knew that if you traded across the board, controlled your risk, and went with the trend, it just had to work."
The markets are potentially moving into a new phase, where the consolidation and lack of direction seen in recent months is now breaking out
into a new trend. The coiled spring has been unleashed. Trends tend to
persist until such point in time that the trend has extinguished itself. How long it will last is anyone guess, but I know in which direction I will be trading.
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