The truth about trend trading: Why following the trend is more profitable than predicting the market?

Trend Following Is Not About Buying Low and Selling High

Many beginners understand trading as “buy low, sell high,” but trend followers operate with a different logic. The core of trend following is not about finding the lowest or highest points, but about staying in the trend for as long as possible once it has started.

This sounds like making “money in the middle,” which is easy to say but tests a trader’s patience and discipline in practice. Trend followers first need to identify the current market trend, then trade according to the trend direction, aiming to steadily capture the majority of the trend’s profits.

Why is this approach more reliable? Because you don’t have to worry about completely missing the bottom of a trend. What’s the downside? You might be misled by false breakouts or fail to cut losses at reversal points. But from a long-term statistical perspective, trend following remains one of the most stable and effective trading strategies.

The Two Major Challenges of Trend Following

Challenge 1: How to Determine the Trend Direction

It sounds incredibly simple, but in actual operation, it is the “Achilles’ heel” for most traders. The market has various indicators like moving averages, trendlines, volatility, etc., but the problem is: you can’t rely on just one indicator; you need to consider multiple factors and adjust based on different timeframes.

For example, you can confirm the long-term trend on a daily chart, then switch to hourly or 15-minute charts to find specific entry points. Also, always be alert to false breakouts and trend reversals—sometimes the market can suddenly change direction, requiring quick strategy adjustments or stop-loss execution.

Challenge 2: Never Being Able to Capture the Entire Trend

This is the fate of trend following. Since trend followers must wait for the trend to establish before entering, by definition, they are bound to miss the initial surge of the trend.

The most common mistake among beginners is: trying to predict “when the new trend will come” before it is clearly confirmed. This predictive mindset is very dangerous, often leading to premature entries and unnecessary losses. Waiting for the trend to appear and overcoming impatience is essential for trend followers to develop their inner discipline.

Four Powerful Tools: How to Judge the Trend

1. Chart Pattern Continuation — The Most Intuitive Visual Signal

When observing candlestick charts, the market often forms typical patterns such as head and shoulders, double bottoms, ascending triangles, etc. These patterns usually indicate trend continuation or imminent reversal, serving as helpful signals for entry and exit.

Case Study: During a downtrend, prices may pause at certain points, forming rectangular or flag consolidation patterns. As a trend follower, avoid trading impulsively during these sideways consolidations, because prices are just oscillating without a clear direction. The best approach is to wait for a breakout beyond the rectangle, especially a breakdown of support, to enter a short position, which better confirms trend continuation.

After a flag consolidation, prices often accelerate along the original trend direction. Entering after a breakout from the flag can help you ride this continuation wave smoothly.

2. Moving Averages — The Tool to Smooth Price Fluctuations

The purpose of moving averages is to “iron out” short-term price fluctuations, allowing you to see the medium- and long-term trend clearly. Simple judgment: Price above the moving average = uptrend; price below the moving average = downtrend.

An advanced method is to set up a moving average channel. Using two 20-period moving averages—one based on the high prices and one on the low prices—can form a price channel. In an uptrend, prices tend to stay above the channel; when prices fall back into the channel, trend followers can wait for a rebound from within the channel before entering, which is a low-risk entry point.

3. Trendline Rebounds — Using Straight Lines to Grasp Market Pulse

Trendlines are straight lines connecting highs or lows on the chart, clearly showing the market’s direction and strength. Generally: Price above an upward trendline = market moving up; price breaking below the trendline = trend may be changing.

Practical Tip: In an uptrend, connect two consecutive lows with a straight line. When the price retraces near the trendline, trend followers wait patiently, confirming that the price hasn’t broken the trendline before going long on a rebound.

Trendlines can also be applied across different timeframes. Many traders identify the main trendline on the daily chart and then look for specific chart patterns and entry signals on hourly or 1-hour charts, balancing the big picture with details.

4. Pivot Points — Mathematical Calculation of Support and Resistance

Pivot points are support and resistance levels calculated from the previous trading day’s open, close, high, and low prices. If the price continues to rise above the pivot point = uptrend; if it stays below the pivot point = downtrend.

The magic of pivot points lies in their ability to signal trend shifts: when you observe that pivot points over several days are moving downward, it indicates a transition from an uptrend to a downtrend, and vice versa.

The Exit Dilemma in Trend Following

Many traders spend a lot of effort on entries but are careless about exits, ultimately losing profits. The goal of trend following is to capture the majority of a long-term trend, not every small move. A good exit strategy should follow these principles:

• Don’t close early due to minor short-term pullbacks
• Set trailing stops to raise the stop-loss level as profits grow
• Consider exiting when trendlines are broken or moving averages give a death cross
• Regularly review trading logs to identify patterns of premature exits

If you are consistently practicing trend following but results are unsatisfactory, the problem often lies in your exit strategy. Many traders have significant room for improvement here.

Final Advice

Trend following sounds simple, but in practice, it requires a lot of patience and discipline. It’s not about predicting the market but about adapting to it. Follow the market’s volatility rather than your own desires.

Avoid adding positions out of greed, and don’t cut losses out of fear. Stick to your trading rules, keep detailed records of every trade, and review regularly—if you can do these, becoming an excellent trend follower is not far away.

Remember: The market rewards disciplined and execution-oriented traders, not predictors.