Not every trader can devote their full attention to trading. Some are trading as a side hustle while keeping a regular job while some can’t afford to sit for hours in front of a computer, monitoring the market and trading simultaneously.
For such individuals, the Trend Following System offers a practical solution to the problem, helping them to monitor their business without devoting too much time to the market.
The Trend Following System is a trading approach that can be developed by individuals who have little or no time to be abreast of the market or can’t sit for long to monitor their business.
With the system, a trader captures trends that will boost profits and cut their losses short. To achieve this goal, a trend follower shouldn’t concentrate on a single asset but a diversified list in multiple markets. This offers them the opportunity to capture trending events in those markets. A good trend indicator has always a place in our Best Metatrader Indicator list page.
Benefits of Trend System
If you are yet to understand the importance of a Trend Following System for traders, you may consider some of the outstanding benefits of the system:
1. You can be abreast of trends
Most trend following strategies have a goal: monitor the market and identify when a new trend is about to be formed. This keeps you abreast of the major trends in the market. When you do, you may have got yourself a winning formula that will give you positive results for years.
2. No Rigid or Exact Exits and Entries
When following the trend, the market moves are your focus while paying little or no attention to minor fluctuations.
This offers you a good number of margins to experiment with while trading, without being stuck to a specific margin. You can also determine when to get out at the top’s trend and when not. You will find such flexibility crucial to successful trading.
3. Lower Transactional Costs
Lower transactional cost is one of the major benefits of using this trading system. Unlike day trading and other trading systems that attract huge transactional costs and thereby make some trading strategies unappealing, you won’t spend much money when using the trading system.
4. It is Less Time-Consuming
As previously mentioned, one of the reasons for the trend following system is to enable busy traders to monitor their businesses. Hence, it doesn’t require as much time as trading without the tool.
More so, extreme precision is not a requirement for using the tool. You have the liberty to express yourself through your trading since you don’t require precise exits or entries.
Thus, if you don’t have much time but can spare a little time to use the Trend Following System, you can trade successfully without hassles. That’s how easy the system is.
5. You Can Cut Your Losses Early
A common trend among successful traders is their ability to minimize their losses while maximizing their profits. Putting their ability to put downside risk under control has a significant impact on their trading and overall success.
You can imitate them, too. While some may continue trading with the hope that the market will bounce back miraculously top enable them to recoup their losses. However, it doesn’t work that way.
The tool helps you to have a decent view of the trading market and how to reduce your losses while maximizing your profit. That is a better trading technique than expecting a miraculous change in the market.
The Trend Following System is obviously one of the best trading tools for all classes of traders, irrespective of their years of experience in the business.
How to Build a Functional Trend System:
As a trader, you have to options to choose from: look for an existing trend following system to use or create yours. However, using an existing one isn’t a good idea, create yours. Rather than blindly copy someone’s trading system, creating a custom made trading system is more advantageous, you build it to suit your purpose.
Here are the five key elements to building a functional Trend Following System:
1. Trade multiple markets
Trade a trending market offers you better chances at making money from trading. Thus, you must trade multiple markets if you desire to become a successful trader.
Thus, consider trading all sectors such as bonds, metals, indices, interest rates, currencies, and what have you. However, always remember to strike a balance so that you won’t overtrade one sector at the expense of others.
2. Risk a small percentage of your investment on each trade
Trading isn’t a game of certainty but probabilities. Thus, you should consider risking a small percentage of your investment on each trade to learn the ropes and tricks that can help you to master the sector and trade successfully. As a rule of thumb, limit your risk to just 1% of your account. Remember, you are trading multiple markets simultaneously.
3. Know the most appropriate time to enter a trade
You can enter a trade in many ways. However, none of the several ways can be considered the best. Thus, you must identify the method you can execute comfortably.
While considering the entry, don’t neglect other important trading aspects that may impact your trading such as positioning, risk management, and what have you. This knowledge will come in handy when making serious trading decisions.
4. Know when to exit an unfavourable market
Sometimes, your well thought out plans may fail. When such occurs, knowing the right time to exist can make a huge difference. Hence, before trading, know exactly when you will pull out of the trade in advance.
When you know when to cut your losses, you are less likely going to lose more money than necessary.
5. Know when to exit even when making a profit
Some traders don’t consider it necessary to have an exit point when making a profit. That may be a huge mistake. The allure of making a profit may make you lose your guard. You may be so engrossed in the profit that you overlook signs that the market may go against you.
Hence, before you start trading, have an exit point, even when the market favours you and be ready to stick to it.
Final Remarks on Trend Following System
Trading can be fun and financially rewarding if you do it right. The Trend Following System is one of the several trading tools at your disposal. Your ability to use them judiciously will determine how successful or otherwise trader you will become.
And to simplify a lot of things for you, we have our very own developed winning Forex Indicator, which is based around locating the trend swiftly and is viewed as an essential part of the trading tool kit.
The indicator has progressed through various backtest over the past seven years on many currency pairs applying different timeframes by showing high accuracy in identifying the trend at an early stage. So make use of all these and other tools available here to improve not only your profitability but also ability.