Glossary
Trend Following
A trading style that enters positions in the direction of the prevailing price trend.
Trend following assumes that assets that have been rising are more likely to keep rising, and assets that have been falling are more likely to keep falling. Traders use moving averages, breakouts, and momentum indicators to identify trends.
Key Points
- Works best in markets with sustained directional moves.
- Often produces many small losses and a few large winners.
- Risk management is essential to survive whipsaws.