More on trend following
Trend following is where the money really is! Why? Because you’re not bobbing in and out of the markets trying to catch a few quid.
Instead you’re finding established trends to ride for quite a long way. There are several ways to catch trends. See: Trading with Guppy and Revisiting the Williams Vix Fix . The technique in the chart below is based mainly on using Aroon and RSI indicators. This seems more efficient and less energy/time consuming.
With trend following the mathematics for profitability is different because:
- You don’t consider the 80:20 rule (80% of failures / 20% successful trades) as much.
- In a sound trend following method, your ratio could be 60:40 or even 80:20. But the winnings on 40% or 20% of successful trends followed could be several times what it would be in traditional trading methods.
- The ratio of aggregate winnings made to aggregate losses is expected to be quite large overall.
See also: Trend continuation and trend following.
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