Trend Following Strategy

Overview

Trend following aims to capture sustained directional moves in the market. Instead of predicting reversals, this strategy focuses on trading in the direction of the established trend.

When It Works Best

Trend following performs well in markets with strong momentum, clear directional bias, and minimal choppiness.

Entry Rules

• Identify trend direction using EMAs (20/50/200) or SuperTrend.
• Enter on pullbacks to moving averages or trendline support.
• Confirm with ADX or momentum indicators.

Exit Rules

• Place stop-loss below the most recent swing low (long) or swing high (short).
• Use trailing stops to ride long trends.
• Exit when price closes against the trend or breaks the trendline.

Common Mistakes

• Entering too late after the trend is exhausted.
• Trading trends during low-volume sessions.
• Ignoring higher timeframe trend direction.