As a trend follower, we don’t generate trends nor we predict trends. We merely follow trends. However it is a waiting game and it takes lots of patience and time.
You first plan your trades which include the point at which you enter the market and the point at which you exit from the market. After you enter, the market may go against you and you see your floating loss becoming bigger and bigger. Or it may start to trend and you see your floating profit go up and up. At this point, what would you do? If you are making losses, would you be worried and keep watching the charts with a fear that the drawdown would get bigger and bigger? Would you close your trade or would you hold on to your trades and pray that the market will go in your favour soon? If the market start to trend, would you close the trades prematurely with a fear that your profits will be gone if you leave it open?
This is a characteristic of most traders. Fear and greed make them cut their profits and let their losses run. To be a successful trend trader, you have to plan your trades and trade according to your plan. You should instead cut your losses and let your profits run. Obviously it is easier said than done. Therefore the focus of a good trader, whether a trend trader or a day trader, should be on the mindset when trading rather than on the technical aspects.
How do you maintain peace of mind when you suffer a temporary drawdown when trading?
Don’t predict your returns. When you don’t predict, you have zero expectations. When you have zero expectations, you have no emotions and when you have no emotions you will have peace of mind.
Just leave it to the market to dictate the trends and your Return on Investments (ROI) and take whatever that comes along.