Cotter on Investing by John Cotter

Author:John Cotter
Language: eng
Format: epub
ISBN: ISBN: 978-0-85719-162-5
Publisher: Harriman House

The shorter the time frame, the stronger the case

The shorter your investment time horizon, the more important TA becomes. This is why day, swing and trend traders use TA far more than long-term investors. Warren Buffett, and his mentor before him, Benjamin Graham, both spoke about how prices in the market would react differently over different time periods. They referred to the market in the short-term being a voting machine and in the long-term being a weighing machine. In other words, in the short-term, momentum could take the price of a security in any direction, but in the long-term the fundamentals will reassert themselves.

The view that value is the key long-term driver of price from two dyed-in-the wool fundamentalists is hardly surprising. However, in the short-term, they admit it’s different. Price movements become more fickle and apparently random, and when trying to forecast short-term price direction current momentum should not be ignored.

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