Saturday, February 02, 2013

What we are all looking for

The chart below is of one of the best performing stocks so far in 2013. As you can see, the actual breakout occurred back in November, but has just carried onwards and upwards, and has accelerated over recent sessions. Price movements like these are what trend followers look for - a minimum level of risk when entering the position, followed by a relatively stable trend to follow.

Trend followers also do not place any limits on how far price can go (if asked, then a trend followers' price targets are infinity for a long trade, and zero for a short trade!). Someone who would get fearful of losing open profits, or maybe would have used indicators to supposedly identify an overbought condition, would probably have only got 10% (if that) of this move. All a trend follower would do is sit in his position, update his trailing stop as required, and what the profits go until the trend had extinguished itself.

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