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When to Take Profits When Trend Following

When to Take Profits When Trend Following

In trend following there are rules and then there are emotions. The rules tell us we should use a trailing stop. This trailing stop can be based on many personal preferences. However how do you feel when you have a nice profit in a position and your system has been in a draw down for quite sometime? The emotional urge is to grab that profit. However in order to be successful in trend following, constantly we have to do the uncomfortable. I will share a personal trade. I am long the Singapore stock index…Eurostoxx and the French stock market index CAC. On an emotional level I would have preferred not being long any of these. However learned a long time ago I can not choose which trades to take. I especially did not want to go long the CAC right before French elections. Again…you can not choose your trades like you can not choose your family. Actually this CAC trade has been working…Has been means nothing in trend following as we have to ready to give back profits at times in order to be available for a return to a sustained trend. Nothing simply goes straight or down. More of the time we get whipped around with a lot of false breakouts which at best lead to small loses. There is no right or wrong. Wrong is not following your system that should be based on risk per trade..risk per sector and total risk in the portfolio. The funny thing also with trend following, you can do everything ( Right) as per your system and lose money. However when you deviate from your system and make money, the propensity to succeed long term is dismissed.

 

Trend following is you dealing with your emotions. Learn how to overcome your emotions. Learn how to overcome the inevitable fear and greed and the odds of success are greatly enhanced.

 

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS, AND FOREIGN EXCHANGE (“FOREX”) IS SUBSTANTIAL.

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