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Trend Following

What is Trend Following?

Trend following is a trading strategy that aims to capitalize on the momentum of an asset's price movement. It is based on the idea that prices tend to move in a persistent direction for a certain period. Traders using this strategy seek to enter the market when a trend is established and exit when the trend shows signs of reversing.

Key Elements of Trend Following

  • 📈 **Trend Identification**: The first step is to identify a trend. This can be done using various indicators such as moving averages, trend lines, and momentum indicators.
  • **Entry Points**: Traders enter a position when they believe a trend is established. This could be after a breakout from a previous high or low.
  • **Exit Points**: Exiting a trade is as crucial as entering. Traders often use trailing stops, support and resistance levels, or opposite signals to exit.
  • **Risk Management**: Effective risk management is essential. This includes setting stop-loss orders and managing position sizes to minimize potential losses.

Indicators Used in Trend Following

  • **Moving Averages**: Simple Moving Average (SMA) and Exponential Moving Average (EMA) are commonly used to smooth out price data and identify the direction of the trend.
  • **Directional Movement Index (DMI)**: Measures the strength and direction of a trend, including the Average Directional Index (ADX) which shows the overall strength.
  • **Parabolic SAR**: Provides potential reversal points in the trend by placing dots above or below the price.
  • **Relative Strength Index (RSI)**: Indicates overbought or oversold conditions, helping to gauge the strength of the trend.
  • **MACD (Moving Average Convergence Divergence)**: Shows the relationship between two moving averages to identify momentum and trend direction.
  • **Ichimoku Kinko Hyo**: Offers a comprehensive view of trend direction, support, and resistance levels.

Popular Trend Following Strategies

  • **Turtle Trading**: Based on breakouts of historical highs and lows. Uses a combination of 20-day and 55-day breakouts for entries and exits.
  • **Trend Screener**: Utilizes multiple indicators like trend lines, reversal dots, and momentum tools to identify and confirm trends across various timeframes and assets.
  • **Smart Trend Trading System**: Combines indicators like Trend Breakout Catcher, Smart Trailing Stop, and Smart Cloud to provide a holistic view of market dynamics.

Advantages and Disadvantages

  • **Advantages**:
    • Potential for large profits during strong trends.
    • Can be applied to various markets including Forex, stocks, and commodities.
    • Reduces emotional decision-making by following predefined rules.
  • **Disadvantages**:
    • Lower win rate as trends can be infrequent.
    • Requires patience and discipline to follow the strategy.
    • Can result in significant drawdowns during sideways markets.

Real-World Examples

  • **TrendDECODER**: Uses tools like Projective TrendLine, RealTime TrendLine, and FiboLevels to identify and follow trends. It provides early signals and dynamic support/resistance levels.
  • **BDA Trend Finder**: Alerts traders to developing trends by combining higher timeframe data with current price movements. Suitable for various markets and timeframes.
  • **Swing Continuation**: Focuses on swing highs and lows to identify low-risk, high-reward patterns. Uses a currency meter to filter trades based on currency strength.

Conclusion

Trend following is a robust strategy that can yield significant returns if executed correctly. By leveraging various indicators and adhering to strict risk management principles, traders can navigate the complexities of the market and capitalize on prevailing trends. 🚀

Ever felt like you’re navigating a wolf-infested forest while trading Forex? Buckle up because Black Wolf MT4 might just be your guide—or your worst nightmare! With its 'blind faith in trends' approach, this EA promises to unleash some wild trading moves. But is it truly a wo ...

Release Date: 08/12/2021

Welcome to the chaotic and unpredictable world of Forex trading! Here, traders are often at the mercy of volatile price swings that can make you feel like you're on a roller coaster ride with a blindfold. Enter the Trend Chief indicator—your potential guiding star in this vast ...

Release Date: 09/05/2023

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Release Date: 06/02/2023

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Release Date: 05/03/2023

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Release Date: 01/07/2021

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Release Date: 01/07/2021

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Release Date: 01/07/2021

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Release Date: 07/05/2021

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Release Date: 26/08/2021

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Release Date: 06/07/2024

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Release Date: 07/02/2022

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Release Date: 01/07/2021

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Release Date: 04/05/2023

EA Goku

Easy Rating: 3/2

MQL Rating: 5/1

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Release Date: 19/11/2023

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Release Date: 21/07/2023

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Release Date: 25/05/2023

GOLD Edge PRO

Easy Rating: 5/1

MQL Rating: 483/6

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Release Date: 24/09/2022

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Release Date: 06/10/2022

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Release Date: 07/05/2021

Rizzy

Easy Rating: 0/0

MQL Rating: 5/10

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Release Date: 03/01/2024

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Release Date: 12/03/2021

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Release Date: 05/05/2023

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Release Date: 06/01/2024

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Release Date: 20/10/2022

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Release Date: 15/03/2024

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Release Date: 08/03/2023

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Release Date: 05/11/2023

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Release Date: 10/01/2024

Dark Power

Easy Rating: 2.5/2

MQL Rating: 465/33

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Release Date: 14/10/2021

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Release Date: 18/08/2021

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Release Date: 09/03/2021

Hippo Trader Pro

Easy Rating: 5/1

MQL Rating: 431/61

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Release Date: 08/02/2021

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Release Date: 14/10/2021

EA Thomas

Easy Rating: 5/1

MQL Rating: 449/78

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Release Date: 15/02/2022

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Release Date: 29/06/2024

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Release Date: 25/02/2023

Welcome to the rollercoaster ride of Forex trading with 'Supertrend by KivancOzbilgic'! 🌟 This indicator promises to be your guiding star in the chaotic universe of market trends. But does it really live up to the hype? Let's dissect it with the precision of a surgeon and the ...

Release Date: 06/02/2023

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Release Date: 01/02/2023

Ah, the Trend Range Indicator—another shiny tool in the vast universe of Forex trading. Developed by the illustrious Claudius Marius Walter, this indicator promises to distinguish between sideways and trend phases without repainting. Sounds like a dream, right? Well, let's dive ...

Release Date: 20/01/2023

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Release Date: 28/09/2020

Dark Absolute Trend: Because who doesn't want to follow the trend without the hassle of repainting signals? This indicator promises to be your trusty sidekick in the chaotic world of Forex trading. Dive in to see if it lives up to the hype or if it's just another flash in the pan ...

Release Date: 09/03/2021

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Release Date: 09/11/2021

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Release Date: 08/02/2019

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Release Date: 08/02/2019

Dark Dione

Easy Rating: 4.5/2

MQL Rating: 485/58

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Release Date: 22/05/2021

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Release Date: 02/03/2021

RSI GbjJpy Bot

Easy Rating: 1.7/3

MQL Rating: 3/1

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Release Date: 07/11/2022

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Release Date: 27/03/2022

Buy Sell Signal Low TF is a free indicator available for MetaTrader 4 and 5, designed to provide buy/sell signals in low timeframes such as M5 and M15. It leverages the SMMA (13, 21, 35) to determine the trend and the CCI (8) to generate signals. The indicator issues alerts at th ...

Release Date: 22/03/2022