Short-Term Fluctuations Versus Long-Range Trends: Unearthing Investment Opportunities

Betting against the crowd is risky but possible as long as we identify time frames and constraintsConstraints in which we have an edge over the madding crowd. In this chapter, I illustrate this point through an investment strategy known as buy-low-sell-highBuy low, sell high. The idea is that on a very short time scale, simple constraintsConstraints are operating on the system and that these constraintsConstraints may serve to give us an edge for investment. This chapter emphasizes themes discussed in previous chapters and explains why, even for repeated games, we should adopt a cautious approach by adopting the Kelly criterionKelly criterion. We focus here on short time frames that require us to think like short-lived creatures (e.g., bees), rather than immortal gods.