I saw a fortune-teller on the streets of New Orleans one time. People would walk by and she would tell their fortune. I often wondered why she was on the street if she could tell the future. Why didn’t she go to Wall Street make millions and retire? Why didn’t she go to the casino that was less than a mile from where she was sitting?
The obvious answer is that she could not tell fortunes at all. No one can.
The future is something unknown to all of us. So when we trade why do so many people trade as if they can tell the future? Why do so many risk their hard-earned money on a future that is unknown?
Many people just expect the market to keep moving in the up direction because they have been told it will. These are historic traders or investors. They say things like the markets have averaged 12% for the past 100 years. That’s great but I will not be alive in 100 years. What if it doesn’t average 12% in the 30 years you are in the market?
I’m not saying that you can’t make money or even become a millionaire by investing 10% of your income in the market for the next 30 years.
What I am saying is there are different ways that don’t depend on requiring the ability to tell the future or depending on the investment strategy of the masses.
There is a better way the trend following way. This way gets you out of the market when it’s going down.
Trend following has stood the test of time.