The Long Term Trend in the Stock Market
When you decide to invest in the stock market, you must always understand how the Stock Market moves in the long run. Many investors assume that the trend is still on the upside.
Of course, this rule may not apply to all stock markets but refers to the most important ones.
If you decide to use bearish strategies on the stock market, it will always be better to do so in the short term. Mean reverting strategies are very useful, especially in mature markets.
You need to know that the more mature the market is, the more mean-reverting strategies work. So trend follower strategies will tend to run less.
When a market is big, liquid, and efficient, it will tend to move little.
For example, the current US Stock Market with its S&P 500 Index moves with the mean-reverting bias. Of course, it is possible to trade the s&p 500 index with trend follower logic but always on very long, weekly or monthly timeframes.
The rule is that trends exist, but only in high time frames.
Those who use logical trend follower downward on the stock market are mathematically certain to fail.
Many traders avoid opening short stock market positions. They prefer to use the options for coverage or to speculate on downward movements to take advantage of the increase in volatility.
When the stock market moves upwards, volatility is generally low, while when it drops, it drops violently and volatility rises significantly.
How the Stock Market Moves in the Long Term
The long-term is influenced by macroeconomic data and central banks. It is difficult for individual actions to move the American market. Movements occur by sectors.
When a sector starts to lose, all the titles in that sector will do more or less harm.
Obviously there will be titles that will be earned or that will lose little compared to others. This depends on the relative strength of the individual stocks compared to their index, and there is an indicator to calculate it.
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