Trend Following - Why Does it Work

Trend following is the most popular trading style. It works on direction and momentum. When there is a trend, the trader makes a fortune. As a trend follower, a trader should know that he is minimising losses and maximising profit when there is a trend. During other times, there are mostly breakeven days.

Trend following style of trading tends to have few but big winners. You can meet great trend followers like Ross Cameron, Ashish Chugh, and Sasha Evdakov, who have made millions by following trends. Whether you are a new trader or professional, learn from their successes and mistakes.

A tip from the successful trend follower 'Ross Cameron' is to look for the stocks in trends that can move 20 to 30% in a day.

Trend following is not a prediction but a matter of record. It is a trading strategy that always works to create a weatherproof portfolio. Capture the bulk of a trend. Understand the trend. Compare trend trading systems and pull profits in markets.

Trend following tells when to buy or sell an asset. It says you should buy an asset when its price trend moves upward, and sell it when its pattern goes down, expecting movements to continue in the same direction as it is trending at present.

Why Does Trend Following Work?

  • • Trend following works well as it shows the market direction in the form of trend patterns. The trend patterns can be easily used to decide a trade.
  • • Market changes obviously. We need to record changes and update our systems from time to time. Trend following involves finding the long market trends before they come to the radar of the masses.
  • • Simply following the trend blindly, doesn't work. Update and analysis are necessary.

There are various techniques and time-frames to determine the direction of the market and generate a trade signal, for example, moving averages, 20 Day Breakout, momentum indicator technique.

Trend following should be systematic. Trend following involves more than just telling when to buy or sell an asset and supply & demand factors. Market exposure, risk management, cutting of losses are also under consideration.

As a trader, you can do research and read books on the trend following and develop your trend following trading system. You can bring the balance in different markets you are trading with the help of trend following.

Summing Up

Market changes and surprises. It moves up and down with sentiment and Trends flow accordingly. Trend following styled trading demands the discipline to follow specific rules to grow wealth and might affect your investing life very well.