How do smart investors follow the trend?

Any investment market has its own rules of operation. When it operates according to this law, a trend will be formed. Once the trend is formed, it will not change easily for a relatively long period of time. In the process of the market running according to the trend, the price tends to fluctuate up and down, but these fluctuations are actually noise in a macro and longer-term perspective, and it does not affect the trend or the general trend of the market.

What investors in the market often need to do when the trend is running is to wait patiently and wait for the trend to take us forward, instead of being too much affected by the noise of market fluctuations, and then misleading our operations. In my understanding, this is to take advantage of the trend.

I thought of the above two paragraphs again today because I saw another change in the investment market in the morning: silver exploded and jumped over the weekend, jumping from the previous hovering around $25 to over $28.

The cause of this incident is that retail investors, under the call of the opinion leaders of the Reddit forum again, turned their attention to silver after the short-selling in the stock market last week, and launched a joint action to pull silver over the weekend. Why silver? Because the financial circle has been rumored that silver has been suppressed by many investment banks (including Goldman Sachs) for a long time, so the price has seriously deviated from the value.

This jump in silver may appear to many people as an accident, but in my opinion it is a certain necessity.

Since I also have part of my position in silver, I recalled my experience of investing in silver when I saw this incident.

After 2000, the dominant force in the precious metals market, in addition to industrial or civilian demand in the past, the Fed's interest rate hikes or cuts actually began to play an increasingly important role, even a key role.

Since the outbreak of the financial crisis in 2008, the Federal Reserve began to release water on a large scale. Since then, gold and silver have started a round of unprecedented surge. Among them, silver has risen from $9 in 2009 to $45 in 2011. After that, the new Federal Reserve Chairman Yellen took office and began to raise interest rates, and gold and silver began to fall. Silver fell from $45 all the way to $13 in 2016.

In this round of bull and bear, the financial policy of the Federal Reserve dominates the trend of silver and is also the fundamental driving force of the trend of silver.

If we master this law, then we only need to grasp the policy direction of the Fed to invest in silver----As long as the Fed is raising interest rates, there is a high probability that silver will continue to fall, and we can place a fixed investment; as long as the Fed starts to cut interest rates, silver will likely resume its upward trend, so we must observe the risks and prepare to sell when the risks are higher.

I started investing in silver around 2015 after Yellen came to power to start raising interest rates. At that time, the price of silver was around $15. When silver exceeds $15, I stop the regular investment, and when silver falls below $15, I restart the regular investment.

After the new chairman of the Federal Reserve started to cut interest rates in 2019, I roughly judged that the long-term rising cycle of silver was about to begin. In addition, silver was basically stable above $15, so I stopped regular investment.

From 2015 until now, I have not sold a single gram of silver, because during this period, the Federal Reserve lowered interest rates while releasing water, and will maintain the current extremely loose environment for quite a long time. So during this period of time, there is no fundamental obstacle to the rise of silver, so as long as the general environment remains unchanged, the upward momentum of silver will basically not change.

That being the case, then I just take the position in my hand and follow the general trend, regardless of market fluctuations, until one day the Federal Reserve raises interest rates to 2% or the silver market suddenly appears an irresistible force to reverse this trend.

In this process, the flood of funds will definitely enter the silver market in one form or another. The gathering of retail investors this time is an example, so this incident seems to me to be an accidental necessity. Although it is impossible for me to predict that the funds will enter in this way in advance, the inevitable entry of funds is something we can think of according to common sense.

In fact, this rule is also applicable to the stock market. After 2008, the financial policies of the central banks of various countries have actually become the driving force leading the stock market. This rule also applies to my country's stock market. If the stock market crash in 2015 had not been for the intervention of some sensitive factors, it would not have happened.

Since last year, my country's A-shares have started a new round of good gains. Some investors were lucky enough to buy some good stocks at low levels in previous years. Because they rose well last year, they were afraid that the profits they got would run away, so they bought stocks. It is a pity that it was thrown away in a hurry. Because the long-term upward trend of A-shares has just begun, if you can firmly grasp this point, investors now only need to hold the chips and wait for the A-share market to continue to move forward. It is not yet time to harvest.

I started investing in index funds in 2016 and stopped investing in index funds in 2019. I have never sold them in the past 4 years. My judgment is based on this:The bull market of A shares has just begun.

This rule also applies to the digital currency market, so the current digital currency market has not yet reached the time to sell and harvest.Therefore, in the past few days, I have seen many readers leaving messages, throwing away the bargaining chips they have accumulated so hard, which is a pity.

Tomorrow, I will combine this to share with you some observations on this round of digital currency bull market.