Today my last surviving long trade triggered its stop. This trade had been in place since the middle of February, and ended up generating a +6R profit (chart below).
Unfortunately the last couple of days showed price action to the downside which eroded some of the profit. With trend following, you will never get out at the extreme of a price move - there is always an element of giving some of the profits back before the exit is triggered.
However, when utilising such an approach, it is important that no attempt is made to try and be 'smart' and try and predict future price movements. If I had tried to do that, or had I exited on the basis that some indicator had suggested the stock was overbought, the chances are I would have got out a lot earlier in the trend. Price was my guide.
This particular stock had been in a stable, quiet uptrend, despite the
lack of a direction and a high level of volatility in the general markets. All
good things come to an end.
The system parameters used tell me when to get in, as well as when to get out a trade. If I am going to override those signals, then what would be the point of using a systematic approach? Apart from updating the trailing stop, in 99% of cases there is no other trade management to consider. You try and avoid any price 'noise', or news, and let the trade play itself out. You stay in the trade until your exit signal is triggered which denotes that the existing trend is over. You book the result, be it a profit or loss, and move on.
As things stand, I am now totally in cash, and will wait for some direction in the market before making any new trades.