Aligning With Trends Is Natural And Healthy

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Fact:Betting against trends doesn’t work. It’s physically impossible.

Observe surfers as an example. There’s a reason they ride waves toward the shore instead of out to sea. That’s the direction the waves move. It’s that simple. Attempts of surfing against the waves results in failure. Every single time.

Over the course of my career, I’ve identified three truths about markets and life:

1. Everything moves.

2. Movement can be influenced by many different factors.

3. No one can predict how markets will move next.

Regarding the first, without movement there is no chance to profit. For anyone to make a profit, they need a trend – a move from point A to a different point B. If both point values are the same, there is no trend and no profit.

Next, markets movement is a function of both fundamental data and feelings towards the data. If the data is “good”, but people don’t like it, they refuse to buy and the price stays the same or falls. Fundamentals are important, but sentiment is far and away more important.

It’s impossible to know how people will feel when new data is released. Without the ability to control people’s feelings, it’s impossible to predict how markets will move with any consistency.

Profitable businesses understand these facts. Rather than pretend they aren’t true, they do the following:

1. Monitor movement of all markets, not a concentrated group. (Because they don’t know what will trend next).

2. Align their business with this movement, not against it.

3. Stick with the things that are working and discard what is not.

Never predict. Only react.

Twitter gets it. Jerry gets it.

Do you?