An investment approach that identifies and holds securities in established uptrends — being long when price trends are rising, exiting when trends break.
Deeper Explanation
Trend following is philosophically the opposite of contrarian investing. Where contrarians buy into weakness hoping for reversal, trend followers buy into strength expecting continuation. The edge lies in the documented momentum factor: trends persist longer than random walk theory predicts because information diffuses slowly, institutions move gradually, and narrative takes time to shift the consensus. Trend following has poor win rates (more losing trades than winning) but positive expected value because winners are allowed to run and losers are cut quickly. The discipline of the exit rule is what makes trend following work — without it, even good trend identification is defeated by holding reversals too long.
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