The trend is your friend — until it ends. Trend following is the oldest and most reliable trading strategy: Buy what rises, sell what falls. No guessing, no hoping, just the trend.

Why Trend Following Works

Markets move in trends — not randomly. Economic cycles, monetary policy, corporate earnings, and investor sentiment create persistent movements lasting months or years. Trend followers ride these waves.

Historical returns: The SG Trend Index (benchmark for trend-following hedge funds) has averaged 6-8% p.a. with negative correlation to stocks since 2000. In crisis years (2008, 2022), trend followers were often the only ones making money.

The Ground Rules

1. Follow the Trend — Do Not Fight It

When price is above the moving average, you are long. Below: flat or short. No opinion, no forecast — only price matters.

2. Cut Losses Quickly

Trend followers typically have a hit rate of only 30-40%. But winners are 3-10x larger than losers. Cut losses short, let profits run.

3. Diversify Across Markets

Classic trend followers trade 50-100 markets simultaneously: stock indices, bonds, currencies, commodities. The more markets, the more trends you can catch.

Simple Trend Following Systems

Dual Moving Average Crossover

Buy when SMA 50 crosses above SMA 200 (Golden Cross)
Sell when SMA 50 crosses below SMA 200 (Death Cross)

Donchian Channel Breakout

Buy when price reaches a new 20-day high
Sell when it reaches a new 10-day low
The system of Richard Dennis Turtle Traders — generated millions

Absolute Momentum (200-Day Line)

Invest in S&P 500 when above SMA 200
Switch to bonds/cash when below
The simplest system in the world — yet beat buy-and-hold over 20+ years (with significantly lower drawdown)

Trend Following + AI

Our AI improves classic trend following through:

Multi-timeframe analysis: Trend on daily, weekly, and monthly basis must align
Volume confirmation: Trend without volume is weak
Sentiment filter: Extreme euphoria warns of trend end
Sector rotation: Invest in sectors with strongest trends

When Trend Following Fails

Sideways markets are the trend followers enemy. When the market oscillates in a range, the system generates many small losses. Solution: Filters like the ADX — only trade when ADX above 25 indicates a trend exists.

Bottom Line: Trend following is not exciting. You miss bottoms and tops. But you catch the biggest moves in between — and that is what counts long-term.