Trend following is a mental game. It is you against your emotions…greed and fear. Trading and trend following are never easy. It does not matter what you trade…stocks..bonds…commodities. They are all tough to scratch out a profit.The only way if you want to succeed in trend following is follow your plan. The fact is most traders fail at trend following. The number is probably higher than 80%.
More so, most traders do not even have a plan….I think this…I think that…and lose money.
Will demonstrate on a real trade that I have been in for a long time. I have been whipped around prior and have had many loses. However currently Cocoa is trending. I have no idea if it will continue or stop. In the below chart you will see various times if you were short there were “painful” retracements. For instance yesterday cocoa was up a hurtful 4.15%.
There were other instances. The only way to stay in a trade is to follow your plan. Do not have the fear of having your profits evaporate. Do not think you can add more. You need to develop a plan that matches your personality and most importantly the mental stamina to stick with it…
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.”