This might be the single most important concept in trading. Traders should constantly assess whether the market is trending, and an “always-in” approach can help a trader to make that important determination. If you had to be in the market at all times, either long or short, the always-in position is whatever your current position is. Some variation of this is used by many traders, including institutions. For example, most mutual funds are usually always-in long, and most hedge funds remain close to fully invested, but often have always-in long positions in some markets while simultaneously having always-in short positions in others. Individual traders should consider using an always-in approach if they tend to miss too many big moves.
Determining the always-in direction is different from asking whether the trend is up or down, because most trend traders don't hold a position when the market is unclear. The market, at all times, is either always-in long or always-in short, and there is usually a general consensus about the direction of the trend. Traders who take 20 or more trades a day see the always-in position flipping repeatedly throughout the day, but very few traders could reverse this often, day after day. However, traders who are just looking for the best three to 10 swings a day, and are willing to allow multiple pullbacks without changing their opinion about the direction of the current swing, have an always-in mentality. They can either reverse ...