In my experience, a trader's risk taking matrix needs to include strategies that can extract profits when the market is rewarding reversionary outcomes and make money when the market is paying momentum traders. This is not easy to do technically and goes against much market
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folklore, bias and 'hero worship’.
Look at it this way - if the market under consideration, for the holding period concerned historically, presently and in your forecast demonstrates reversionary behaviour, then why fight that?
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Look at it this way - if the market under consideration, for the holding period concerned historically, presently and in your forecast demonstrates reversionary behaviour, then why fight that?
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Why deflect with sentences like "I only trade with the trend"? Equally and similarly, if the market under consideration, for the holding period concerned historically, presently and in your forecast demonstrates 'momentum' or trend behaviour
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[not that I can define either in advance but that is beside the point] then deploy momentum approaches. Why deflect with sentences like “...its too overbought / oversold” [again terms that I cannot define in 25 years of research].
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When a superstar trader says that I don't fight the markets, this is what they mean. Ignore should you wish, but this quantitative and cerebral flexibility is priceless in a PM.
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