Sometimes You Get Lucky Trend Following
Sometimes you get lucky when trend following. The example is a trade one of my commodity trading advisors are in ..Lean Hogs. Lean Hogs had a low in November of last year and have been trending upwards since. Today some news might have come out which absolutely does not affect a trend followers decisions but the market for Lean Hogs is up 8.55% this morning. Many times you get carried into trends and you get surprised in situations like this.
However and this a Huge However…the exact opposite can occur and you become very unlucky. As much as there was a gap up today ( so far) in Lean Hogs, I will promise you sometime in your trend following career you will be on the absolute wrong side of a trade and it will gap against you. This is why money management is so critical to your success. Do not risk more than 1% of your account on any trade…do not risk more than 5% per sector. What I have seen over my career is when you do not adhere to this type of money management you will wake up one morning and losses will be magnified. We are dealing with risk and unknown. Because sometimes you get lucky when you are trend following …do not get too excited because if you invest in commodities long enough you will wake up one morning and your trades will go sharply against you.
Trend following is a lifetime strategy.
Futures trading involves risk. People can and do lose money