October 13, 2005

How can we know the top?

How can we know the top? A great trend follower, John W. Henry (JWH), tackles that very issue in his September 2005 commentary:

"The same problem exists with the exit point on the trade. Because JWH does not try and find the market tops, there will always be some give back or price concession from the maximum. Note that if we tried to get out before the maximum, there will still be a trading cost. It would be the opportunity cost of not participating in the trade as it moves to the maximum. We view that this cost is higher than the cost of exiting after the high. The reason is simple. We cannot tell when or where the maximum price will occur."