How to Identify & Ride Market Trends (Backed by Research)
📊 1. Identify the Trend
Use moving averages (especially 50 & 200 EMA) to determine direction.
According to Brock, Lakonishok & LeBaron (1992), moving average crossovers significantly outperform random strategies.
🔍 2. Confirm Strength
Apply ADX (Welles Wilder, 1978) to measure trend strength — values above 25 suggest a strong trend.
Use MACD (Gerald Appel) to confirm momentum shifts and entries.
📈 3. Enter With the Trend
Uptrend: Buy on pullbacks near support or moving averages.
Downtrend: Sell on rallies near resistance.
This follows the “buy high, sell higher” principle outlined by trend-following systems like those of Richard Dennis (Turtle Traders).
🎯 4. Set Risk Controls
Use stop-losses below higher lows (uptrend) or above lower highs (downtrend).
Apply trailing stops to lock in profits — a key rule in strategies like those tested by Clenow (2013) in “Following the Trend.”
⏳ 5. Stay Disciplined
Trends can last weeks or months — avoid emotional exits.
Research shows trend-following works best when applied consistently over time (see AQR Capital's 2015 study on trend persistence across asset classes).
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Trend trading isn’t guesswork — it’s a rule-based strategy backed by decades of research. Identify, confirm, ride, protect, and repeat.
