Trend Following Strategy - Journal Guide
Trend following captures sustained directional moves by entering in the direction of the prevailing trend and holding until the trend reverses.
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Stocks, Forex, Crypto
Swing
Beginner
Entry & Exit Rules
Entry Rules
- Price above 50-day and 200-day moving averages (uptrend)
- ADX above 25 indicating a trending market
- Enter on a pullback to the 20-day moving average
- Higher highs and higher lows confirmed on daily chart
Exit Rules
- Price closes below the 50-day moving average
- Trail stop at the most recent swing low
- Exit on a lower high + lower low pattern
- Reduce position by 50% at 3:1 risk-reward
Key Metrics to Track
What to Record
Risk Management
Risk 1-2% of account per trade. Trend following has a lower win rate (40-50%) but compensates with large winners. Never move your stop loss further from entry. Let winners ride by trailing stops rather than taking fixed targets.
What Is Trend Following?
Trend following is the oldest and most proven trading strategy. The premise is simple: markets trend, and those trends persist longer than most people expect. You buy when the trend is up, sell when the trend is down, and hold until the trend changes.
The challenge is not finding trends. It’s staying in them.
Why Trend Following Works
Markets trend because of human behavior:
- Herding causes traders to pile into moves, extending them
- Information dissemination is gradual, not instant, creating extended moves
- Central bank policies create multi-month to multi-year trends in currencies and rates
Academic research confirms that momentum (the basis of trend following) is one of the most robust market anomalies across asset classes and time periods.
The Psychology of Trend Following
The hardest part is accepting frequent small losses while waiting for the big winner. Your journal becomes your anchor:
Track Every Loss
Small losses are the cost of doing business. Log them without emotion. After 100 trades, you’ll see that 3-4 big winners more than cover 50-60 small losses.
Measure Holding Period
New trend followers exit too early. Track how long you hold winners vs. how long the trend continues after you exit. The gap reveals money left on the table.
Record Market Regime
Trend following underperforms in choppy, mean-reverting markets. By logging market conditions, you learn when to be aggressive and when to step aside.
How to Journal Trend Trades
Every trend trade entry should capture:
- Trend confirmation - What signals told you a trend exists?
- Entry quality - Did you buy the pullback or chase?
- Position size - Did you follow your plan?
- Stop placement - Where is the invalidation point?
At exit, record why you exited and whether the trend continued. This single data point over time tells you whether you’re capturing enough of each trend.
Common Trend Following Filters
Improve your signal quality by tracking these in your journal:
- ADX above 25 filters out non-trending markets
- Moving average slope shows trend direction clearly
- Volume trend confirms institutional participation
- Cross-asset confirmation (sector, index) validates the move
Your journal data will reveal which filters matter most for the markets you trade.
How JournalPlus Helps
Strategy Tagging
Tag every trade with this strategy and track win rate, expectancy, and P&L by strategy over time.
Rule Compliance
Log whether you followed entry and exit rules. Spot when rule-breaking costs you money.
Performance Analytics
See which market conditions produce the best results for this strategy with automatic breakdowns.
Mistake Detection
AI flags pattern-breaking trades so you can stay disciplined and refine your edge.
What Traders Say
"My journal showed I was exiting winners at 1.5:1 R:R when the average trend trade ran to 4:1. Letting winners run doubled my monthly P&L."
"Tracking ADX at entry helped me avoid choppy markets. I only trade when ADX is above 25 and my win rate went from 38% to 52%."
Frequently Asked Questions
What is the biggest challenge with trend following?
The low win rate. Trend following often has a 40-50% win rate, which means more losing trades than winners. The strategy works because winners are significantly larger than losers. Psychologically, this requires patience and discipline.
How do I know when a trend has ended?
A trend ends when price makes a lower low followed by a lower high (for uptrends) or a higher high followed by a higher low (for downtrends). A close below the 50-day moving average is another reliable signal.
Can I trend follow in multiple markets simultaneously?
Yes, and diversification across markets is actually a core principle of trend following. Trends appear in stocks, forex, crypto, and commodities at different times. Spreading across markets smooths your equity curve.
Start Tracking Your Trades
Journal every trade, track your strategy performance, and find your edge with JournalPlus.
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