Trend following is the ultimate contrarian move—where real success lies in doing what feels the hardest, over and over again.
In a world driven by emotions and noise, this strategy thrives on going against the grain and sticking to a disciplined path, no matter how challenging.
Trend following trading is a strategy that seeks to profit in both rising and falling markets by focusing on trends, without favouring bull or bear conditions. It follows price movements, regardless of how irrational they may appear because trends often extend further than anticipated. This approach avoids traditional analysis, predictions, or emotional decision-making. Instead of relying on news, market forecasts, or expert opinions, trend followers simply observe price action and follow it to its conclusion, believing that momentum is a more reliable indicator than any fundamental analysis or short-term market sentiment.
Unlike conventional trading strategies, trend following doesn’t aim for small, steady returns or day-to-day gains. Its primary goal is to capture significant moves by letting profits run and cutting losses quickly. Risk management is central to this approach, with strict exit strategies, including stop losses, to protect capital.
By staying disciplined, trend followers avoid behavioural biases like prematurely locking in gains or hesitating to close losing positions. The strategy often takes advantage of mass psychology, where emotional market participants panic, creating opportunities for trend followers to profit from these large swings.
Trend following is built on a systematic, data-driven approach, emphasizing process overpredictions. It relies on a scientific, rule-based method similar to strategies employed by successful teams in other fields, like the MIT card-counting team. By sticking to predefined rules and focusing on the magnitude of wins rather than the frequency of success, trend followers position themselves as the “house” in the trading game, aiming for outsized returns by capturing major market movements rather than trying to predict short-term fluctuations.
