Ask Colin

Although I am trying to trade a big trend, I find it difficult to sit through corrections of up to 25% because there is no support level at a higher price at which to set my stop-loss level. Any comments?

This is the most difficult thing in trend trading: There is an extremely strong upswing in the trend that leaves the last trough in the trend well behind. I think there are a number of way this can be dealt with:

1. Accept that this is a part of trend trading and learn to develop the discipline. It might help if you invest smaller amounts in each stock until you get used to it.

2. My approach is to take profits progressively. I take half of my position off each time a stock doubles, but there is nothing to stop you having a different rule for taking some profits. I find that taking some money off the table locks in some profits and also makes it easier psychologically to let the rest run.

3. Maybe it will always be too hard for you to sit through the corrections. There is nothing to say that you cannot have a plan to take profits when a trend is well extended on the upside and buy back again either when the correction seems to be over or when the trend makes a new high.

I hope one of these makes sense to you or feels right for you.