Tips for Trend Following

What are some tips for trend following? We all like trading trends. It’s the name of the game when it comes to trading profitably over the longer term.

What are the trend trading rules? 

Here are some simple yet robust rules that will hold you in good stead no matter what times frames you are trading. 

1) Price action is your leading indicator. Ignore all news and fundamental information. 

Fundamental factors tell us what is suppose to be happening in the market. Technical factors tell us what is actually happening in the market

2) The Trend is your friend. You’ve heard it a million times. Yet you’d be surprised how many traders think they can outsmart the market by trying to pick tops or bottoms. So always ask yourself, is the market or stock going UP, DOWN or SIDEWAYS?  It’s not rocket science!

3) You may be able to predict shorter term trends yet longer term trends are almost impossible to predict. To capture longer term trends, you need to position yourself for both shorter and longer term gains (see point 4)

4) Stop management is key. No matter how great you think a trade looks, there is always a risk that it can turn into a loss. Some traders work with tighter stops for 50% of their position to capture the best short term moves. Then run with wider stops for the other 50% in case a longer term trend materialises.

5) Embrace your emotions. I’m not a big believer in eliminating your emotions to become a successful trader. We’re not robots! Being able to embrace your emotions is far more important. This means accepting your thoughts and feelings without letting them take control. 

This can be achieved in the simplest of ways:

i) By completely understanding your strategy & ensuring it is simple, robust & suits your personality
 ii) By obsessing over your trades in the planning stage rather than after you pull the trigger
 iii) By not watching the screens every second of the day

If you’re after a trend following strategy, take a look at the Growth Portfolio. Nick and Trish use the Growth Portfolio to manage their super fund. You can see their results and trading positions within The Chartist Member’s area).