Monday, July 15, 2013

Patience pays

I've talked a number of times recently about having patience with winning trades, and tremendous impatience with losing positions. Over the last few weeks there have been plenty of small, losing trades, with a number of failed breakouts, or price reversals (and one big loss to boot).

When you are a trend follower, some of the most profitable days are when you do absolutely...nothing. The chart below of US stock Applied Micro Circuits Corp ($AMCC) shows this very well, together with the benefit of having patience in letting positions run until you get an exit signal.

This position was opened in mid-June following the reversal of trend, combined with the fall in volatility and the tight price consolidation. After the initial surge and consolidation it struggled and fell back, coming close to the stop level. However, price held just above it, before starting to turn back up. Today, it has moved up to new highs.

What to do now? Again, absolutely...nothing. I will trail my stop up per my rules and will exit the trade when that level is breached. Could be tomorrow, could be in six months. Who knows?

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