The saying “the trend is your friend” has guided traders for decades. But what does following the trend really mean in practice? Trend following strategies aim to capture major price movements by staying aligned with the dominant market direction. While simple in concept, trend following requires patience, discipline, and clear risk management.
Let’s find out more!
The Core Idea Behind Trend Following
At its heart, trend following is about ignoring noise and focusing on the bigger picture. Instead of predicting tops and bottoms, traders ride existing moves until clear signs of reversal appear.
- Uptrend: Higher highs and higher lows.
- Downtrend: Lower highs and lower lows.
- Sideways: No clear direction — trend following is less effective here.
Key Insight: Successful trend followers don’t try to be first; they try to stay in the middle of strong, sustained moves.
Comparing Trend Following To Other Strategies
Unlike scalping or range trading, trend following seeks large gains over longer horizons.
| Strategy | Timeframe | Goal | Risk Profile |
| Scalping | Seconds-minutes | Capture tiny, frequent gains | High frequency, low reward |
| Range Trading | Hours-days | Trade between set levels | Moderate, requires discipline |
| Trend Following | Days-weeks | Ride big market moves | Lower frequency, higher reward |
Note: Trend following is less stressful than scalping but requires more patience and conviction.
Real Market Examples Of Trend Following
- Gold in 2020: Prices trended steadily upward as investors sought safe havens. Trend followers using moving averages captured large gains.
- Tech stocks 2016–2021: The sector rose consistently, offering opportunities for long-term trend-based positions.
- Oil in 2014: A major downtrend unfolded, rewarding short sellers who stayed with the move.
These examples show that major trends often persist longer than expected, rewarding those who stay disciplined.
How Traders Apply Trend Following In Practice
Here’s a simplified roadmap many trend followers use:
- Identify The Trend — Moving averages, ADX, or simple price action.
- Enter When Trend Strengthens — Add positions as confirmation builds.
- Ride The Move — Let profits run instead of exiting too early.
- Protect Capital — Use trailing stops to lock in gains.
- Exit Only On Reversal — Stay until the trend is broken.
Tip: Many traders struggle by exiting too soon. Trend following rewards patience more than constant tinkering.
Strengths And Weaknesses Of Trend Following
Strengths
- Captures the largest moves in markets.
- Less stressful than short-term strategies.
- Works across multiple asset classes.
Weaknesses
- Long periods of sideways markets can cause losses.
- Requires large stop-losses to survive volatility.
- Demands emotional discipline to hold through pullbacks.
Key Takeaways For Traders
- Trends exist in every market — forex, stocks, commodities, and crypto.
- Patience and discipline separate successful trend followers from the rest.
- Tools like moving averages and trailing stops help, but mindset is equally important.
- Trend following is less about prediction and more about participation in ongoing moves.
Conclusion
Trend following strategies remain one of the most effective approaches for traders who want to capture large, sustained market moves. By focusing on the bigger picture, applying strong risk management, and resisting the urge to exit too early, traders can align themselves with the flow of the market rather than fight against it.