As you know in Systematic Trading I firmly believe it is not my business to pick tops or bottoms.
Trend following models in any form, however, aspire to remain in the same trade for the longest amount of time as long as the trend is persistent. However we can readily accept that few trends are linear straight line affairs and diversification over timescales/time horizons provides a broader objective assessment of maximising P&L'
The EURUSD is circa 20 big figs higher that the recent 1.1890 June 6TH or so low in Q2 2010. The trend obseved by many Momentum followers remains "Up" and for Greenback weakness to continue to continue......or will it????
It is however always prudent to money manage any position. Not by undermining the original hypothesis for the long but at key pre determined objectives to be patient and accept that the rate of change of the trend may be changing.
Hence with current Spot at 1.3850 I suggest that to protect EURUSD long entry 1.2300, I am now prepared to write 1.4000 DEC CALL Receiving 2.36 effectivly allowing me to partial exit 1.4236
The trend in the underlying may continue higher but I can assess the rate of change of momentum at a later stage and either decide whether to remain in the trend
Enjoy
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