Trend following and contrarian (3)
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Serialized "Trading Philosophy" …… 6
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When I drank well over the weekend and came home at dawn, I was snapped at, “You’re late...”
I answered, “No, it’s not late at night, it’s early in the morning,” but is that not good enough?
In the market, what matters is “time.”
I predicted it would rise and it rose... but it took 5 years to gain only 10%.
That doesn’t mean the forecast was correct, does it?
When considering trend-following or contrarian strategies, the issue of “time” cannot be ignored.
【Case 1】
Over 3 years it declined, and over 5 years of bottoming, it slowly moved up from the lows.
I judged that “this is it” and bought.
In low-priced stock investing, there is the perspective of aiming for the “perfect timing” to use time efficiently, but from the absolute low, it can be several percent up to double.
However, because one buys in the low-price zone while aiming for an exit from the bottom consolidation without large fluctuations, practitioners would call this “contrarian.”
【Case 2】
Long-term price stagnation continued, and the range of fluctuation became very small. It was getting tight!
When I thought “this is it,” there was movement, and a bullish candlestick appeared on the monthly chart.
Thinking “there’s no mistake in the signs,” I carefully picked up the dips.
Since I joined after the move had already begun, this can be called a trend-following entry, but since I bought on the immediate dip, the way I entered the position is contrarian.
In Lin Investment Research Institute’s low-priced stock investing, the first thing is to observe the big ups and downs in stock price.
Both cases are an “it’s common” situation born from such observation.
We end up identifying trends over long periods like 3 years or 5 years, and viewpoints like these make actual trading easier.
However, for people who are accustomed to instantaneous market analyses like “today...” or “tomorrow...,” there will be a time axis gap, so explaining it suddenly will not be understood.
