Quick Answer
The Trend Following Strategy is one of the most reliable trading approaches. It involves identifying and riding established market trends using tools like moving averages, RSI, and price action. Beginners can start with simple setups, while advanced traders can refine entries with multi-timeframe analysis and risk management. Trend following works across intraday, swing, and positional trading in Indian markets.
Introduction
Most beginners in the Indian stock market struggle with one painful truth: they often trade against the trend. Buying falling stocks or shorting rising ones leads to losses. Here’s the truth: the trend is your best friend. By following the trend, you align with market momentum instead of fighting it.
This guide will take you from beginner to pro in trend following strategy, showing you how to identify, enter, and exit trades with confidence. Whether you’re trading NSE intraday or holding BSE stocks for weeks, trend following can transform your results.
What is Trend Following?
Trend following is a trading style that seeks to capture gains by riding established market trends. Instead of predicting tops or bottoms, traders wait for confirmation and follow the direction of price movement.
- Uptrend: Higher highs and higher lows.
- Downtrend: Lower highs and lower lows.
- Sideways: Range-bound price action.
Step-by-Step Trend Following Strategy
1. Identify the Trend
Use tools like Moving Averages (20 EMA, 50 EMA, 200 EMA) to spot direction.
2. Confirm with Indicators
RSI above 50 confirms bullish momentum; below 50 confirms bearish momentum.
3. Entry Rules
- Buy when price is above 50 EMA and RSI > 50.
- Sell when price is below 50 EMA and RSI < 50.
4. Exit Rules
Trail stop-loss with moving averages or book profits at resistance/support zones.
5. Risk Management
Use [Link to Position Size Calculator] to calculate lot sizes. Always maintain 1:2 risk-reward ratio.
Key Benefits of Trend Following
- Simple and beginner-friendly.
- Works across intraday, swing, and positional trading.
- Reduces emotional trading by following rules.
- Aligns with institutional momentum.
Common Mistakes to Avoid
- Entering trades before trend confirmation.
- Ignoring stop-loss and risk management.
- Overtrading in sideways markets.
- Using too many indicators → analysis paralysis.
Pro Tips for Indian Traders
- Combine trend following with volume analysis for stronger signals.
- Use multiple timeframes (daily + 15-min charts) for precision entries.
- Avoid trading against SEBI regulations when using leverage.
- Backtest strategies on NSE/BSE data before live trading.
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Join Now for ₹499FAQs on Trend Following Strategy
1. What is the best indicator for trend following?
Moving Averages and RSI are widely used in Indian markets.
2. Can beginners use trend following?
Yes, it’s beginner-friendly and rule-based.
3. Does trend following work in Indian markets?
Yes, NSE and BSE stocks show strong trending behavior.
4. How to avoid false signals?
Confirm with multiple indicators and volume analysis.
5. Is trend following suitable for intraday trading?
Yes, but use shorter timeframes like 5-min or 15-min charts.
6. Can trend following be automated?
Yes, many brokers allow algo trading with trend filters.
7. What’s the biggest mistake traders make?
Trading against the trend and ignoring stop-loss.
Conclusion
The Trend Following Strategy is a timeless approach that helps traders align with market momentum. By following rules, managing risk, and avoiding common mistakes, you can trade trends with confidence and consistency.
If you’re serious about mastering trend following and other profitable strategies, our ₹499 Trading Course at Tradetantra gives you step-by-step setups, backtested strategies, and tools to trade smarter.
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