Many swing traders and investors are currently sitting on a First Class problem. But it’s a problem, nonetheless.
These traders are sitting in positions with huge open profits.
I can use NVDA as an example. But there are many, many big winning trends still acting well.
Those of us who like to style ourselves as Trend Followers will soon be faced with a difficult decision – how and when to determine when a trend has ended.
It’s easy in hindsight to look at a chart and spot the moment a trend was invalidated and an optimal exit price is clear. But in real-time, it’s not so easy. In fact, it’s impossible. Because contrary to popular belief, no trader can reliably and consistently predict the future.
But the stakes are high in these moments. For a trend follower, the occasional big wins are what we rely on to make our nut.
The life of a trend-following trader can best be described as long periods of near-constant frustration punctuated by short moments of fleeting bliss.
In other words, we get chopped up by frequent false breakouts and false starts, resulting in small loser after small loser, with the occasional small winner mixed in just to keep us addicted to the process. The net result during this time adds up to a lot of nothing. Just churning commissions and frustration to seemingly no end. This is why we need an occasional big win to make it all worth it.
Then we catch one. [Read more…]