Crisis Hunting

It might sound simple, but are you crisis hunting with your trading strategy?

Why would you want to hunt for a financial crisis? Almost all great trends spring from some form of a crisis. Someone messes up trading for their company account, some company goes belly up, etc. These types of events happen regularly and if you know that to be a fact, then you simply need a trading strategy like trend following to take advantage.

But there is a catch.

When a crisis makes the news it is often too late to profit. The great trend following traders take their positions in markets long before the big event or crisis is ever on the radar screen. They don’t have inside information, but they do have the knowledge that historically a trend often starts long before the final blow-off. Take a look at an old Enron chart for example. That trend was straight down for a long, long time before it was front-page news.