Trend Following isn't easy

Trend following definitely isn’t for the faint hearted traders. :slight_smile:

Was just having some midnight musings while looking at what’s happening in US markets.

Considering that our markets fell nearly 5% from top and we have this scenario in US markets overnight. How can one proceed going forward?

Do we have any trend following traders here on TradingQnA? What are your thoughts on Trend following. What are techniques and ways you use to follow trend and what are the challenges associated with it ?


I am following trend, momentum. And it is hard, more so when positions are taken in stocks when I don’t know what are the reasons for such up moves.

SLs get hit quickly sometimes, and days like yesterday, it was tough, very tough, SLs were pretty quick. And there isn’t much to talk about for TPs, if support levels are breached, book profits.

As with a lot of things in life, if a trader does not about himself, he is bound to get affected more than a trader who knows what he wants.


What exactly was happening in the US markets? I am seeing that snp closed only 1.45% down.


Very interesting point.

There was bit of panic when I had a glance with S&P being (-2.6% down) and Nasdaq nearly negative by 4%.

Guess there was some recovery later.


I personally find it tough to follow trend always. My trading style is a combination of trend following and bottom/top fishing and enduring some pain if the trend lasts a bit longer. Ofcourse everything done with SL :fishing_pole_and_fish:


trend following method sound easy but is not definitely not so especially with leverage.
I use trailing stop once the price moves in my favour and sometimes it has done wonders and sometimes the opposite.
If price moves a lot in my favour like you mentioned big gap downs or ups, i book partial profits and move my stop to the breakeven to catch a bigger move after retracement but it’s a 50:50.

though lot of experts advice against this, it is a lot of fun and highly rewarding it you are right in catching the turn or the markets.

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Not when you are the fish :fishing_pole_and_fish:

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Either do it intraday, or if you want to draw trendlines for long term, do it on sgx nifty cfd which is round the clock. You will have to manage gap up’s and down’s in that by hedging or closing intraday itself.

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Trend following as a trading philosophy is lucrative. Perhaps the most lucrative of them all. But globally markets tend to trend only 30-35% of the time. So psychologically we need to wire ourselves to loose more times than we win and absorb drawdowns. The bright side is that when we win we make a killing that more than offset the losses.

Keep it simple is my mantra. Price dekho, trade karo. I code, backtest and deploy my trend following strategies. Such objectivity when done right gives the confidence to stick with it, no matter what. The challenging part is to train the mind to accept the system with it’s characteristic drawdowns and loosing streaks. But as they say practice leads to perfection. Trading is after all a simple game of accuracy, risk-reward and capital adequacy. It can be practised and perfected.

Also I deploy naked option buying strategies. It ensures that my max loss per trade is well defined (no matter what market does overnight or intraday) and I can ride the trend if it sustains. The low accuracy of a trend following system is a great neutralizer for the theta decay with naked options.

Note:- when trend following make sure do so on an instrument that is likely to trend like say Nifty.

Fun keliye sgx, Dow dekho. Par isko dekhkar analysis mat karo. Whatever we need to trade trends is there on our instrument chart. Also Sgx ya Dow ko dekhke bechaini hoti hey to it means position size is little bit more than what one can handle.


I am trying so much to learn this.

this is why it has lured me.

Till now i was thinking the other way. now that i read this, yeah this is true.

so nifty or banknifty is a good start?
Thanks T7

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Option buying works under the following two scenarios broadly.

  1. If you are trading momentum up and down moves like range break outs you wont experience time value decay as you enter and exit quickly.

  2. Low accuracy systems with high risk reward where time value in options causes you to loose less than spot movement when market moves against you (which happens more number of times). Also the inherent risk limitation protect against gaps and flash moves.

Nifty is a great start. Bank Nifty is more volatile and hence the risk is more for a trend follower.

Trend following is easy! Just have a baseline. I mean seriously price was already below 200 EMA yesterday, there shouldn’t even be a reason to sell put call overnight position in first place

Are you talking about Nifty or BN?

Well. I guess I am one who always goes against the trend. I am more comfy buying low and selling high. I do this only with nifty assuming nifty will only go in one direction on long run and I have the patience to wait.
At 15200 I was 80 percent invested. As we came higher towards 17k I started getting lighter. At 18k my equity exposure came to 40 percent of my account value. At 18700 I brought it down to 20percent. I covered my shorts which I had taken at 18700 yesterday. And today I have started adding longs. At this level I am around 42 percent invested in equity. I really wish market comes down to 17k in next one month or so.

This has worked for me so far and it’s been 5 years since I entered the markets and so far am outperforming nifty at account value level.
I have always found following trend very very difficult. I feel I will end up buying high and selling low.


If one is following a discretionary approach to trading one is always guessing and figuring out the entries and exit and dilly dallying between greed and fear. This is too much mental load and especially so if trading is a side business. Am a fan of mechanical or systematic approach where mental load tends to zero.


Are you saying your TP is also fixed? Don’t you use trailing SL when the price is moving beyond your TP?

Since I buy options, when market moves in my direction by a certain fixed amount I exit the current strike and take position in the next strike with the same number of lots. This way my risk is reduced and profit is locked. This is bit different from traditional scheme of profit booking where part of the position is liquidated at TP levels and only the balance quantity is kept alive for further trend riding.

As I move to the next strike I get into an option with nearly 80-100 less premium which means that much less to loose if market goes against me after my profit booking point. No explicit trail stops.

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Stoploss and exit are more hard than entries. How do you play with stoploss? Do you put static stoploss or your stoploss depends on chart condition each time?

I have a stop and reverse system. So I exit my short position when long signal comes and vice versa.

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Your system is Intraday based or 1 week or 1 month ?