Trend Following Trading Strategy Guide

Signal Fx Telegram – If you are familiar with trading, you know about trends. A trend shows the direction of a price. It can be ascending, descending, or horizontal. If a trader understands how to define trends, they will most likely have few problems opening a position. A trader needs to have a clear strategy for riding trends to increase the chances of successful trading. This article will look at the most popular trend-trading tips and study some of the most exciting and simple trend following strategies.


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What Is a Trend Following Trading Strategy?

To build an effective trend trading strategy, you need to know how to trade with the trend. Trend trading in Forex is a popular trading style for traders who take advantage of prices moving in one way for a prolonged period. When trading in a trending market, a trader needs to be very careful and pay attention to any signs of the upcoming reversal, which will most likely ruin their setup. One of the greatest trend traders of all time is George Soros, whose trend following trading strategies helped him predict market mood changes.

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Benefits of a Trend Following Method

Trend following trading has multiple advantages over other trading styles. What are the main pros of using this approach?

  • Trend trading can lead to bigger gains. If you follow a trend, you can remain in a winning position as long as possible. Therefore, you will maximize the results of your trades. Trend-followers can adjust the standard risk-reward ratio of 1:3 and raise it to 1:4 or even higher, depending on the trend’s strength.
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  • Trend trading has lower transaction costs. Unlike scalping, trend trading does not require opening tens of positions. This way, you save money because you don’t spend on commissions and spreads for every trade you open.
  • Trend trading saves time. On average, traders need 1-2 hours to monitor the charts and check their trading portfolios when they trade a trend. Trades may run for days or even weeks if the trend is strong. As a result, you have time for other activities.

Does Trend Following Work in Stocks?

Whether you trade on the stock, commodity, or Forex markets, dealing with the trend strategies requires the same rules of technical analysis for all of them. Trends can be found on any chart, so you can try trend following strategy on any instrument you like.

Forex Trading Analysis Trend Lines

Who are famous trend traders?

Successful trend traders managed to make billions of dollars with their trend trading skills, tactics, and knowledge of the market structure. We’ve already highlighted George Soros as one of the influencers of a trend trading approach. However, there are more people we can mention.

One of the big names of trend trading is Ed Seykota. He is one of the traders who was interviewed in “Market Wizards” by Jack Schwager. With only $5 thousand in his pocket, he managed to make $15 million over 12 years.

Another legend of trend trading is David Harding, the CEO of Winton Capital. His trend following fund for clients exceeds $30 billion in assets.

Finally, you have heard about the hero of the “Reminiscences of a Stock Operator” book Jesse Livermore. Some traders name him as a farther of the trend following approach. In 1929, he had $100 million. In today’s money, that’s about $1.5 billion. His sense of market was so impressive that he still inspires traders until now.

These are some of the most recognized trend following traders, who turned their power and skills into money. Maybe you will be the next to join the list?

How to Construct a Trend Following Trading Strategy?

The first step in building a trend following a trading strategy is the most obvious – you need to determine a trend. You can do it either manually or with the help of indicators.

People with an experience in trading can spot a trend in a blink of an eye! The easiest way to do that is to connect highs and lows. You need to connect at least two points on the chart. If the price forms higher highs and higher lows, a trader can suggest that it moves within an uptrend. Vice versa, if the price forms lower lows and lower highs – you are facing a downward pressure, which will likely start a downtrend.

Trend Following Trading Strategy Guide

Trading the Trend Lines Guide

Trend Following Trading Strategy Guide

Forex Trading signals systems can be either manual or automatic. Manual systems involve a trader sitting at the computer screen, looking for signals and interpreting whether to buy or sell. An automated trading system, on the other hand, requires a trader to instruct the software being used to look for certain signals and how they should be interpreted.

Metatrader 4 day trading signals are available for purchase on the web. An investor can obtain forex signals from specialized companies and top forex brokers, generally at a low cost, but mostly are not good. Somewhere between $50 to $100 for monthly rate. Forex Alerts | Trade signals can also be combined with fundamental analysis to give investors another weapon in their stock trading.

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Trend Following Trading Strategy Guide