The trend is your friend: or is it

There are times when people on the market take radically different views, but there are also generally directional trends, which are sometimes very clear.

There are positive periods of time where there is a general trend to share prices rising, and then on the flip side where there will be a general trend where share prices fall.

The question then arises whether you should follow that trend or not, as a private investor.

And the answer to that is impossible to give: generally if there is a trend and you note it starting early enough then there will be opportunities there: for instance it is no good to realise that the market is on an upward spiral after six months, because a lot of the gains may already be there, but if you get in after that trend has been evident for just a month then there could be lots of upside to get exposed to, although the prices of course might fall.

Sometimes a sector does really badly for many years, and the sentiment is very low. This means that people will generally not recommend it. However that could actually lead to a good opportunity to go against the trend. The thinking here is very simply that sentiment is so low that it won't take much good news for sentiment to change, and with the price being low this could lead to a good rally.

Of course such opportunities are not easy to spot, and with many people getting all their news on companies through the financial press and since aforementioned companies probably won't be being touted by the press, then they can be quite hard to find.

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The trend is your friend: or is it

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