Saturday, March 02, 2013

Don't limit your gains

Below are some random charts of some of the best (and worst) performing UK stocks in 2013, and how these could have been traded profitably utilising a trend following strategy. Note that the longs actually broke out during November, after the markets had tried breaking in a downwards direction, and they trended upwards only to give an exit signal in the last few days. I would say that I didn't trade any of these stocks, but were all valid entry signals per my system rules, after which it was simply a case of letting the position run.

No doubt that shortly after the trends started to develop, a lot of traders would have taken their profits and moved on, probably as a result of getting overbought or oversold signals using some form of oscillator. Trend followers do not go for small gains - in its purest form we go for absolute returns, with no potential limits on the size of the profits. Just having the patience to sit in trades like these can do wonders for your equity, as well as your confidence. All you need do is wait for an appropriate exit signal, before you finally close the position.

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