Many swing traders and investors are currently sitting on a First Class problem. But it’s a problem, nonetheless.

These traders are sitting in positions with huge open profits.

I can use NVDA as an example. But there are many, many big winning trends still acting well.

Those of us who like to style ourselves as Trend Followers will soon be faced with a difficult decision – how and when to determine when a trend has ended.

It’s easy in hindsight to look at a chart and spot the moment a trend was invalidated and an optimal exit price is clear. But in real-time, it’s not so easy. In fact, it’s impossible. Because contrary to popular belief, no trader can reliably and consistently predict the future.

But the stakes are high in these moments. For a trend follower, the occasional big wins are what we rely on to make our nut.

The life of a trend-following trader can best be described as long periods of near-constant frustration punctuated by short moments of fleeting bliss.

In other words, we get chopped up by frequent false breakouts and false starts, resulting in small loser after small loser, with the occasional small winner mixed in just to keep us addicted to the process. The net result during this time adds up to a lot of nothing. Just churning commissions and frustration to seemingly no end. This is why we need an occasional big win to make it all worth it.

Then we catch one. [Read more…]

I don’t make money on my couldas, wouldas, or shouldas.

I’ll often fall into the trap of looking at a chart and kicking myself for not taking action at what appears – in hindsight – as an obvious level to have taken some profitable action.

If I had a dollar for every time I uttered: “If only I’d ______”, I’d be typing to you from my palatial estate in the South of France.

Regret is a powerfully negative emotion we must do our best to avoid. It festers like nothing else if left untreated.

Yesterday’s trades have no bearing on today’s setups. Whether I won or lost yesterday does not indicate whether I’ll enter profitable trades today. I’m neither more nor less likely to trade like a genius today.

Every day, every event, every moment is unique. Sure, there will often be similarities to times in the past, but whatever’s happening now will ultimately bear its unique fingerprint.

We can only act upon what is directly in front of us. We have to keep taking our signals as they come. I never know which trade or series of trades will be the ones that make my month or my year in advance. I can only know that after the fact.

The only thing I know with certainty is that if I don’t follow a plan, then I’m lost and will likely be unsatisfied with the end results.

Profits rarely accrue in straight lines. There are usually pullbacks along the way. Sometimes significant ones. How we deal with these drawdowns is what separates the winning traders from the losing traders.

It’s OK – even good! – to learn from my past mistakes. But dwelling on them and regretting the missed opportunities holds me back.

I ain’t got no time for that! I’ve got places to go.

Trade ’em Well,

Sean McLaughlin
Chief Options Strategist
All Star Charts, Technical Analysis Research