Never Look Back

Why have an exit strategy? That’s simple. Having an escape hatch helps protect any gains you made and also protects your principal. But this works only if you’re disciplined in selling when you should. And if you do this, you won’t experience those huge long-term declines in the markets that many buy-and-hold investors have in the past.

If you miss getting in a hot sector early, don’t beat yourself up over lost opportunity. The trend following plan is all about moving forward and looking for the uptrends; it’s not about self-flagellation. Investor Bill Fritz even notes that when you get on that “wave,” you’re usually not the first one on. It’s important to be okay with that. Sure enough, other people eventually join you on the wave. And then you don’t hang on until it crashes on your head—you exit and find your new wave.