Markets are Efficient but Momentum is Key
We believe that markets are efficient, but only over extended periods, not necessarily in the short term. Occasionally, investor behaviour becomes irrational and leads to excessive market prices, either too high or too low. We specialize in identifying these periods in the market when human behaviour creates such mispricings.
Our systematic process to asset selection and portfolio construction uses global indexes to exploit “momentum”, a timeless market inefficiency that results from predictable emotional human behaviour. And, as we all know, human nature never really changes. Over the last 20+ years academic studies have demonstrated momentum anomalies that exist in over 40 global markets across a dozen asset classes that can all be exploited by rule-based processes.
Our mission at ENIGMA – Easy Trend Following is to deliver rule-based, momentum-driven portfolios that outperform indexing while taking on less risk.
Trend Following is Easy but Requires Strict Discipline
To exploit this human created inefficiency in the market and to make profitable investments Easy Trend Following requires two “non-natural” actions:
- We buy asset classes that are showing strong momentum and then watch them extremely closely. If prices start to fall and trigger our model’s exit point, we sell. Immediately. We don’t mind taking small losses. In our process, there is no “holding and hoping”. We are fully quantitative in our actions, which means maths, not emotion, tells us when and what to buy and sell.
- When the assets we own are winning, we continue to hold on to these winning investments until they stop winning, even when we might think that they are becoming over-priced. Again we stick to our system to tell us what and when to sell.
To be able to expect large gains you have to accept the many small losses. This is the real recipe for successful momentum investing. The small losses are offset by large gains. For the math to work and momentum investing to be profitable, you need to act solely by the system rules as we have designed, tested and traded them for many years. This will require strong discipline from every investor as it is also “non-natural”. But we know that the rules that we use will deliver the results that we are seeking.
Check out our portfolios. They have been designed to empower anyone to do what we do.
If you share our passion for maths, markets and money, we invite you to take your trading to a new level: simply fill out the form to start a subscription to our ETF Trading signals and enjoy the same experience as we do: apply maths to the markets to make money.