Most novice traders are right about market direction in FOREX trend following, but then end up losing, because they simply cannot accept huge gains!
Sure, all traders want them, but most traders can't accept them, this will become clearer with a little more explanation.
One of the most important rules of trading is run your profits to cover your inevitable losses.
Most traders fail to do this.
In my experience I have seen traders who are great at getting trend direction right ? Yet they end up getting bumped out of the longer term trends.
They bank a $1 or 2,000, when they could have made $10 ? 20,000!
When they get a profit their delighted.
The bigger the profit gets, the more inclined they are to take it (even though the market is going their way) in the end they snatch it and bank a minor profit.
Why Traders Cant Follow Trends
The reason they do this, is simply they can't accept that in any long term trend volatility will eat into open equity on pullbacks.
This causes emotional turmoil and the thought of losing a profit, means they are grateful for any profit they get.
You must maximize Your Winners
If you are FOREX trend following then you need these trades to pile up huge gains and only exit when your system tells you to.
Look at the Big Picture
It takes courage and discipline to hold a trade when you see a few thousand dollars lost on a pullback, but that is what you have to do.
If you are FOREX trend following try this way of trading:
1. Only trade significant breaks of important market highs or lows ? These normally become the big trends of the year.
2. Place stop below the breakout point ? Do NOT trail the stop to closely give the market room to breathe.
3. Set a profit target based upon your study of price history.
4. Only exit when your system tells you to.
You can make huge profits if you do this.
The big trends last a long time
Keep in mind significant breaks of support or resistance coincide more often than not with economic conditions changing in the country of origin and these can last for months or years.
Accept big drawdowns in open profit - Their normal
Stick with the big trends and you will be rewarded longer term with your FOREX Trend following method.
