So what do you do as a trend follower when you believe a recent signal is going to lose you money? Answer: you put on the trade anyways!
This is the tough part about being a trend follower! You must follow the trade signals religiously.
Why do I use the word religiously? Simply the life of a trend follower involves faith just like the life of a Christian (or for that matter any other faith). You must have faith in your system and then let your system do the work and worrying for you. If you second guess your system, you are guaranteed to make bad emotional decisions and lose money.
As an example as we enter today’s trading session, we (Stock-Signal.com) have a new Sell Signal on the high yield index. I looked at this index over the weekend and it sure looks like it is overdue for an oversold bounce. However, just like it is wrong to play God and presume the future, the same is true with trend following.
How do I know this particular index does not continue to get weaker and more oversold? How do I know that it is not factoring in some piece of news that I have no knowledge about out of Greece, Spain or some other far flung continent?
The simple truth is that I don’t. Therefore, the simple action is to follow this time tested and true system and to follow it religiously.
So the next time you are in this spot remember the words of those who have lost money ahead of you second guessing the system (yours truly in this case)……….”Follow the system!”
This simple advise will make you far more than it costs you in the long run as a trend follower.