Relationship Between Trading Momentum and Pain

Managing the Pain of High Volatility of These Strategies

When times are good, we see a massive inflow of traders talking about momentum and trend strategies. Sure the market is going higher every day and it is easy to buy anything and hold for a week, but they don’t understand the pain that they will need to endure to be in these cycles. They will again arrive late to the cycle, only to be led a path of large unrealized short-term gains, only to lose it all when the market naturally reverses or produces a deeper pullback.

From my experience, there’s no shortcut to success in this business. Either you are in it 100%, or you’re out. If you are in it, you truly understand the volatility you need to incur in order to profit from times of good performance. You understand that it is required to go through the waves of positive and negative momentum and to keep going regardless. These waves can last days, weeks, months and sometimes extend themselves into years.