No matter how ridiculous the reasons behind a new trend may sound as it first appears and no matter how insanely extended the trend gets at the end, trend followers are simply following the price rather than trying to explain it.
I am not exactly a trend follower where the E-mini Dow futures trades I post on this blog are concerned. Quite the contrary as a matter of fact since these short term trades are based on Pivot Points and the strategy I use for this part of my trading would be a better fit within the realm of mean-reversion strategies. That said, trend following rules and general philosophy inform much of my longer term trading.
I am also very much aware that someone's trend might be someone else's correction. However, within each trading time frame, Mr. Covel's statement highlighted above definitely passes the truth test. More importantly, this is very often where and how the irrationality of markets, the existence of which no one who has been awake these past few years would dare doubt, can be converted into alpha.
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