What is Trend Following?
Investopedia.com definition of trend trading is it is a trading strategy that attempts to capture gains through the analysis of an asset’s momentum in a particular direction. The trend trader enters into a long position when a stock is trending upward (successively higher highs). Conversely, a short position is taken when the stock is in a down trend (successively lower highs). Regardless of their chosen time frame, traders will remain in their position until they believe the trend has reversed.
Characteristics of the trend followers :
The trend traders use different techniques and calculations to determine the general direction of the market to generate a trade signal
Once they identify the general direction, they simply jump on the trend and ride it. They do not aim to forecast or predict specific price levels, instead they rely on their calculations to determine a reversal and thus the exit point
Trend followers take what the market offers in the moment, they don’t predict the future
Money management is very important to the trend follower due to the long term view of the trades