What is Trend Following?
Trend Following is a trading methodology that, seeks to capture trends across all markets, using proper risk management.
You’re wondering:
Why does Trend Following work?
The reason is simple.
Markets are driven by emotions, greed, and fear.
When either side is in control, there will be a trend, and Trend Followers can take advantage of this phenomenon. I absolutely believe that price movement patterns are being repeated. They are recurring patterns that appear over and over, with slight variations. This is because markets are driven by humans, and human nature never changes. – Jesse Livermore
Here are a few pieces of research that further validates Trend Following:
• Studies by M Potters proves that Trend Following is profitable over the last 200 years
• Studies by Kathryn M. Kaminski validates that Trend Following thrives during crisis periods
• Following the trend by Andreas Clenow explains how hedge funds and professional traders have been consistently outperforming traditional investment strategies
Now:
Behind this trading methodology, lies 5 trading principles that every successful Trend
Follower must follow.
