The Online Investing AI Blog

During bad times, people want to shrink into their tight boxes of conformist thinking. It’s natural to look for easy and quick answers to solve these problems.

It’s like pulling your hand from a hot stove, but it’s a good idea to learn the lesson and find out how to operate the stove better, too. Otherwise you’re going to have a lot of trips to the hospital for those burned hands.

During bad times, you need to be bold. Being bold doesn’t mean it will be painless; it means honestly assessing the situation, learning the important lessons, and finding the solutions that will change the situation.

Bold solutions might not be quick, either. But, in the long-term, you’ll be successful. Solutions that momentarily alleviate the problem are not solutions. In some cases, they cause more problems over time.

Real, bold solutions do exist to our current economic straits.

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Business Strategy, Investing, Money, Online Investing AI, US Economy economy, growth, Michael Covel, Money, trend following, wealth

Brent and Marilynn @ Flickr

We know that George Washington was the father of our country. But was he also the father of Trend Following investing?

OK. That may be pushing things a little bit, but if you examine the career–especially the military career–Washington did use some essential techniques of great trend followers, like Rich Dennis.

Trend following is an investment strategy that couples risk minimization with return maximization. It does so through a couple key market insights:

• Identify opportunities
• Preserve capital
• Limit risk
• Let your profits run.

Let’s see how some of Washington’s campaigns match up with the trend following philosophy.

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Accelerating Technology, Business Strategy, Dreams Come True, Investing, Money, Online Investing AI, Success, US Economy history, invest, Investing, profits, trend following, washington

As we’ve seen this week, technology and strategy have combined to give the power of hedge fund managers to self-directed investors. Automated Trading can give investors continual access to the market; trend following offers an easy-to-maintain strategy.

Hedge fund managers, though, have access to so many more markets, right? They can trade more than just stocks and bonds.

Now, thanks to aggressive online brokers who are eager to expand their offerings, individual investors now can trade all types of assets. It’s pretty safe to say that if a hedge fund can trade it, so can you.

This gives you another took of a hedge fund manager: diversification.

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Accelerating Technology, Automated Trading, Business Strategy, Investing, Money, Online Investing AI, US Economy Automated Trading, bonds, diversification, etf, ETFs, hedge fund, manager, stocks, trend following

Hedge fund managers have one advantage over individual traders: they’re paid to trade. That’s not always the case for most traders, who have jobs (often full-time) to bring in money for their day-to-day living expenses, as well as save money for their trading activities.

With all that time, hedge fund managers can research and monitor the market. With all that money, they can hire people to research and monitor the market for them, while they play a few rounds of golf and shop for art.

For the individual trader, things are different. Many strategies that suit their lifestyle, won’t fit their dreams. Buy-and-hold is too slow and day-trading (without the ability to constantly manage the trades) can be too risky.

However, individual traders can use trend following strategies to compensate and compete with hedge fund managers.

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Online Investing AI hedge fund, INO, manager, money manager, stock moves, technology, trend following, trends

No, the headline of this post is not the answer to the question: “What three investment strategies don’t go together?”

Critics out there are likely saying that they can see the connection between Automated Trading and Trend Following, but how does Buy and Hold fit in. After all, Buy and Hold is for rigid, risk-averse investors. Buy and Holders would never get involved with Automated Trading and Trend Following is too much bother.

If you’ll give me a little time, I can show you how Automated Trading, Trend Following, and Buy and Hold strategies are actually complementary.

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Business Strategy, Online Investing AI Automated Trading, buy-and-hold, invest, Investing, Money, trend following

Of all the investment methods, Trend Following has one of the largest followings and a pretty solid track record.

The pioneer of trend following was Rich Dennis, a madcap investor from Chicago who turned a couple hundred bucks into a couple hundred million bucks by watching for well-defined trends. Instead of betting on each price movement, Dennis, and later his group of disciples called “The Turtles”, looked for solid movements that were indicated by breakouts.

Even though this sounds relatively easy, the group of Turtles interviewed for the book, The Complete Turtle Trader, by Michael W. Covel, admitted that it could be, at turns, boring and stressful–two emotions that lead to investment mistakes.

In the book, Dennis adds that technology has made it easier for trend following:

“Given what the computer can do today–compared to what it could do a few years ago, I just can’t see how any human could possibly compete with a well-designed computerized set of systems.”

One of our partners, INO has developed several applications for technical analysis that would help trend following traders. You can use a free analysis to determine possible buy and sell points, for example. You’ll have the report emailed to you. Other tools include educational videos and insights from professional traders.

Another powerful tool that can supplement and even hedge the activities of a trend follower is Automated Trading.

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Automated Trading, Investing, Money, Online Investing AI Investing, investing techniques, trader, trading, trend following, trends