In an era where market prices are as fluid as they come, trading may seem intimidating
for new players in the game. The industry is teeming with ‘experts’ who devise ‘tried-and-tested’ strategies like trend following for successful investments, and it’s becoming quite a task for the trade player to choose which one is the best or even real.
The truth is that there is no standardized strategy to conquer the world of trading. According to professional investor and New York Times Bestseller Damon Vickers, one can’t expect all theories and tactics to have a consistent outcome from one person to another. However, he also notes that Trend following might be a specific strategy you cannot ignore.
What is Trend Following?
Trend Following is an investment strategy that takes note of moving market prices, whether short-, medium-, or long-term, that can be observed in a specific industry.
A trader using trend following jumps in on a trend based on their perception of its rising popularity. They do not predict or forecast price levels; they just invest in what is currently established as a trend.
“This trading strategy follows a Bandwagon effect” says Damon Vickers wherein investors lean wherever other investors set their eyes on. Once they see a drop on market prices after some time of investing, they quickly devise an exit strategy but with an intent to re-enter the market once the trend picks up again.
“Trend traders extract profit from isolated trends, and there are many ways to do it. You can base on market indicators like moving averages, on-balance volumes (OBV), MACD or RSI, but ultimately, you have to find a strategy that is an extension of who you are as a trader,” advises Vickers.
What Markets can Trend Following be applied
Another expert advice offered by Vickers is that trend following can virtually be used in every industry:
- Stocks, bonds and interest rates
- Currencies, FX or Forex
- Agriculturals, Softs and Meats
- Mutual Funds
Damon Vickers finally stated that trend following is a combination of many things: observation, trading know-hows, guts, and absolute determination to see trends as an opportunity to invest in what matters when it matters.