What is Trend Following?
Let’s break the term into its two components. Every investor needs a “trend” in place to make money. Think about it, without an upward trend after we purchase an investment, we won’t be able to sell at a higher price and realize a profit. Following is used because trend followers wait for a trend to develop first, then we follow it. We are not trying to anticipate or predict what could happen. We simply follow the trend of what is happening. As trend followers, we try to capture the majority of the trend, either up or down, for profit. As trend followers, we will never get in right at the bottom of a trend nor will we ever get out right at the top. As long as the trend is moving higher, things are on track and we hold our investments. When the trend changes, and the market moves lower, we can move to safety and protect the gains we have made. To apply trend following, we simply look at the market, and using simple tools, determine if the trend is up or down. We then follow what the mar
