Retracements in Trend Following
The basic premise of trend following is so hard for most people. The idea of buying a new high or selling a new low is the anti thesis to virtually all. Everyone wants to be smart and buy low and sell high. That is great but I have not met too many people who can successfully do this. The recent move in cotton was full of it’s pundits. We purchased cotton at 79.03..or something like that…I heard so many traders say it can not go much higher at 100. Well… in reality it went to approx 153.
In trend following we have no idea how high can high be or how low can low be. That is why in trend following we have to do the uncomfortable. Buy new highs (strength)..sell new lows (weakness)… ( even though most of these trades do not work) and not wait for retracements. It is human nature to want a bargain when trading or investing. Waiting however for retracements will lead to missed trades. If I missed the cotton trade this past July my yearly trading results would have been negatively impacted.
Bottom line is do not wait for retracements or pick & chose your trades. Take every trade. Believe in your system and you put yourself in the position to make trend following a life time strategy of compounding money.
Futures trading involves risk. People can and do lose money