Trend Following IS NOT for Everyone

Posted by Howard
on September 13th, 2007

Over on Trader Mike’s site this morning is the quote:

“In order to maximize your profits (let them run), you must be willing to give some of them back.” ~ Van K Tharp

As I watch Google, Baidu, Garmin, Apple, Chipotles and others in my portfolio run away, I am reminded of the quote above and it’s implications for returns. I have sold down all these positions and I see them everyday on my sheets and think, ‘should I sell and lock my profits totally down’. I know Baidu is priced for perfection as are the others, but who is to say from what level they will correct. Maybe they climb another 100 percent before the next correction adn an inevitable stop.

My fear of a big giveback on RIMM and CROX was the reason I sold the stocks too early. There was no real reason to lose my last piece of those stocks.

There is no perfect strategy but you MUST be willing to give back profits to ride trends.

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