Trend Following IS NOT for Everyone

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.


  1. Phil says:

    “I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game.”

    -Edwin LeFevre on Jesse Livermore

  2. Chris says:

    I know “exactly” what you mean (and feel). It is tough, the toughest thing in life to watch a position correct. I sold out of my BIDU shares in late July. It came back and has made new highs. The best say you must be able to weather at least a 25% pullback from highs in order to capture the entire run. I cut and run on most of my holdings in July and early August. However, when looking back, I would have done the same thing because you never get out on top.

  3. JIm Kingsland says:

    speaking of RIMM… very heavy options trading on the call side in the October contracts in strikes from 85 up to 110 even with little change in the stock.

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