Is it a safe assumption to say that the trend is your friend?

Asked 4 years ago

Is it safe to assume that the trend is your friend and that most of the time it’s profitable to go with the flow? I tried doing the opposite and I went against the trend of the spy, thinking it was going to come down, but it kept rising!

Stock watching Investment advice Market trends

Simon Mugo

Thursday, April 08, 2021

Yes, it is safe to say that the trend is your friend. The above statement is true largely due to the physics law that states "a body in motion will stay in motion until an external force stops it."
You might be wondering what a Physics law has to do with trading and investing. The truth is that the markets are driven by human beings who express their emotions about a particular stock by either buying it or selling it.
Investors will tend to keep buying a rising stock until an external development such as a negative earnings report or announcement changes their minds, and they start selling.
The same logic applies to falling stocks, which will keep being sold by investors until something happens to change their minds. Therefore, always use the trend as your friend and buy when a stock is rising, and sell when it starts falling.  