A decade ago I came up with what I named, "The Two-Second Trading System (Three, if you live in California)" These are the rules:
(1) Look at a stock chart.
(2) Ask yourself one question:
“Do I wish that I already owned this stock?”
(3) If yes, it is a BUY; if no, it is a SELL.
Simple, almost eloquent, it utilized the intuitive self, or as science has named it, the right side of the brain. As it has morphed into my current Trend Models, it is still just as effective, only now it uses the left side of the brain, the analytical and sequential side. What follows is an example of both approaches working in tandem to make money in stocks.
On September 13th I posted on this blog two rare earth plays, REE & MCP. I had given them both to my subscriber list about 10 days earlier and at lower prices. Here are the two current charts with the Sep 13 BUY labeled:
The REE chart also includes the LONG generated by the Trend Model while MCP is a recent IPO so its very early LONG wasn't nearly as telling as REE's Trend Model Buy. Nonetheless, the take away from these examples is how Trend Following works (most of the time). At almost any place on these two charts, the Two-Second Trading System worked to get long as did both Trend Models which were long for almost the entire runs up in both stocks.
I think most traders would look at REE and MCP on September 13 and think that it was too late to buy, as both stocks were already UP in a significant way. Trend Followers would have none of that. Both these stocks were clearly in up-trends and the signal was BUY under the Two-Second test, as well via the Trend Models. There were no other considerations. To say it was too late to buy would be tantamount to saying, "These stocks are at top tick, there is nothing more to gain." What are the odds that anyone can pick top tick on anything?
This illustrates the core tenet of Trend Following: Trends in motion tend to stay in motion.
Since sent out to my subscribers, REE is up 70% and MCP is up 50%. Since posted here, REE is up 45% and MCP is up 25%. Yes, I picked two very profitable examples, they all don't do so well, especially only after two to four weeks. But they are conspicuous instances of Trend Following at its core, whether the left or right sides of the brain are called upon to make a decision.
I use them both, but that's me.