There is a popular train of thought that past performance may provide a baseline for predicting future behavior, at least to a minimum degree. Investors would consider historical averages as a baseline and shift away from it depending on new facts or evidence.
Here at ETF Trends, we focus on the 200-day exponential moving average as our baseline. We try to follow funds that move above their 200-day average, which signals a potential buying opportunity. This way we are investing on a momentum opportunity instead of just relying on some primal gut feeling.
For more information on trend following, visit our trend following category.
Max Chen contributed to this article.