Trend Following - Defined
What is trend following? Trend following is a trading style that identifies, and confirms, the directional movement of price, then enters in the direction of the trend until the trend reverses. The system seeks out trends and keeps capital positioned in that direction.
Quotes about Trend Following:
"Don't fight the Tape"
“It may surprise many to know that in my method of trading, when I see by my records that an upward trend is in progress, I become a buyer as soon as a stock makes a new high on its movement, after having had a normal reaction. The same applies whenever I take the short side. Why? Because I am following the trend at the time. My records signal me to go ahead!” Jesse Livermore
Let's break down the term Trend Following into its components. The first part is "trend". Every trader needs a trend to make money. If you think about it, no matter what the technique, if there is not a trend after you buy, then you will not be able to sell at higher prices..."Following" is the next part of the term. We use this word because trend followers always wait for the trend to shift first, then "follow" it. Tom Basso
