Strategies
Trend Following: The Strategy That Outperforms Over Time
Trend following identifies and rides established trends — the statistically most reliable approach for retail traders.
Key rules
- Only trade in the direction of the established trend
- Enter on pullbacks to moving averages or key support
- Use trailing stops to capture extended trend moves
- Accept many small losses — the large wins compensate over time
- Higher timeframe trend alignment is the most important filter
Trend following buys assets making higher highs and higher lows (or shorts assets making lower highs and lower lows). Entry is on pullbacks to support or on confirmed breakouts. The exit is a trailing stop that moves with the trend.
The strategy appears simple but requires accepting many small losses while waiting for the large trending moves that make it profitable.