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“This question is based on the premise that most markets only trend 1/3 of the time…”

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Dear Michael,

This is a question with regards to different timing of funds/allocation coming into a trend following trading account. For example you are running a moving average cross over system and is already in a LONG position due to the favourable cross over condition that indicates an uptrend.

i.e. Strategy: BUY when EMA 20 crosses EMA 50 towards the upside and SELL when it crosses back down.

The question here is what do you do when you receive extra allocation/funds to the trading account in between the signals generated? Do you immediately add on the extra allocation on the current trade or new funds will only be allocated when the next signal is given?

This question is based on the premise that most markets only trend 1/3 of the time and if we always wait till the next signal before allocating the new funds, the opportunity cost seems pretty high. Do advise what does a trend following fund manager do in this case? (trying to remove discretionary decision to the maximum and hence the question)

Much appreciated.

Yours sincerely,
Royal (student of your trend following theories)

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