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What is Trend Following?  Thumbnail

What is Trend Following?

Someone on Twitter asked, "How do you define trend following?"

My official answer: 

Trend following is a directional trading strategy that uses price-based "technical" indicators to identify trends with the objective to gain exposure to the direction of the price trend, expecting the trend to continue. 

The  indicators are "technical" indicators because they are quantitative price based measures of directional movement. 

The technical indicators used in trend following may be as simple as the turtle strategy of buying X-days new high breakout and selling short Y-days new low, or the signal may be a more complex algorithm using differential equations, a Donchian Channel, momentum, or moving averages. 

We call price based indicators technical indicators, as opposed to fundamental, and indicators generate buy and sell signals for trend following. 

Mike Shell