Scott Luke_ McDonald

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What is trend-following in forex trading?

Trend-following is a strategy where traders aim to capture profits by identifying and riding established market trends. The principle is simple: “the trend is your friend.” Traders use moving averages, trendlines, or indicators like ADX to confirm direction. For example, in an uptrend, they buy pullbacks rather than attempting to sell tops. Trend-following works best in strong, directional markets, such as after major economic shifts. However, it struggles in sideways ranges, leading to false signals and whipsaws. To improve results, traders combine it with filters like higher timeframe confirmation or breakout validation. Risk management is critical, as trends eventually reverse. Proper stop placement, such as below swing lows, protects profits. While trend-following may yield fewer trades, it can capture large moves, making it popular among swing and position traders.