Wikipedia definies Trend Following as an investment strategy that tries to take advantage of long-term moves that seem to play out in various markets. The strategy aims to work on the market trend mechanism and take benefit from both sides of the market, enjoying the profits from the ups and downs of the stock or futures markets. Traders who use this approach can use current market price calculation, moving averages and channel breakouts to determine the general direction of the market and to generate trade signals. Traders who employ a trend following strategy do not aim to forecast or predict specific price levels; they simply jump on the trend and ride it.
There is absolutely no need to predict the markets! Professional traders wait for the markets to tell them its intentions then they react. They go with the flow. The GBPUSD and EURUSD have been enjoying an excellent bull run that commenced on January 10. So many traders have been trying to find the “top” or predict the “reversal” point. The old adage “the trend is your friend until it bends” has withstood the test of time. Trend following is one of the few ways that retail traders can benefit from price movement influenced by the institutional traders.
If you are struggling with trading, I wish to share 3 tips that will immediately improve your trading:
1. Stop trying to predict the market! Allow the market to tell you what it’s going to do then react.
2. Always trade with the trend – this gives you an immediate edge.
3. Stop using small time frames for your analysis. Institutional traders use monthly, weekly and daily charts for analysis. I personally use daily and 4 hour charts for my analysis (intraday trading). Using a higher timeframe allows you to see the “big picture” more clearly.
Trend following works! The trend is your friend… Blessings.
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