When I started with my search for what later would become the Stock Trend Investing system, what was I actually looking for? It was not financial freedom or a way to better the world. The thing I wanted was just to find a way to make money and to avoid losing money on the stock market.

I saw that all stocks moved up and down in tandem. I realized that it will be very difficult to do stock picking. There are so many other people doing that. And all that effort is already incorporated in the market price.

The market inefficiencies are not so much in individual stocks. Looking at market movements, I could see that these inefficiencies occur much more often in all stocks together when stock bubbles inflate or deflate.

And when stock markets rise or fall due to the overall economic situation, similar feedback loops to those that system engineers are so familiar with cause markets to move further up or down than what you would expect from just the change in the economic situation.

Recognize when markets turn

Thus I was looking for a way to recognize when markets would turn. I just wanted to know when I should buy funds and when I could best sell the funds I bought before.

I was not looking for a fault-proof system but something that would work most of the time.

With the daily financial news making you mad and bringing continuously conflicting messages about the direction of the stock market, I needed something that was objective; that was not dependent on the news or movements of the day.

Having a full time and busy job, I also needed something that would take little time. Just using it once per month would be OK.

In summary what I wanted was a system that would give me objective signals or indications when to buy index funds or mutual funds and when to sell these based on the expected direction of the overall stock market.

The key element was not so much predicting as well recognizing the pattern in the development of the stock market price.

Tops and Bottoms

Being an engineer, I realized that I did not need to have all the data. I could eliminate noise in the data and reduce the amount of data to analyze by just taking a monthly sample.

The objective was not to be smarter than the market, just to recognize in an objective way what the overall market knows already unconsciously; that the bottom has been set and the market is going up now; or that the top has been set and the market is going down now.

And this is still what I want. I want to be able to buy funds at the time that they give me the best chance to make very good returns. That is just after the bottom has been set; not before because you never know how much further a falling knife falls.

And I want to be able to sell the funds I own at the beginning of a downturn and not when the market is still going up in a bubble since you never know for how many years the bubble will continue to grow.

My objective is not to avoid bubbles. My objective is to make use of them, make money on them and get out before most others, consolidating my profits. There is no noble cause here. Bubbles and stock market trends are part of our capitalist system. I can accept that and want to make use of it.

The Stock Trend Investing system provides me with what I want: objective signals for when most likely a market top or a market bottom has been set. The rest is simply just selecting some good funds that do at least just as good as the market.

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