20 Truths about Trend following

• If traded properly, you will have lots of small losses, a few small gains, and a few big winners.

• You will have to accept that your opinion or beliefs about what might or might not happen count for nothing.

• Often, a new trend will start seemingly for no obvious reason.

• Trends have a tendency to persist, until they don't.

• You do not need to understand the fundamentals behind a stock, commodity or other instrument - however, you do need to have a method of determining whether price is trending or not.

• You never need try to pick a top or a bottom in a market.

• In strongly trending phases, markets can persistently stay overbought or oversold for several months.

• Every so often, traders pronounce that trend following is dead. Usually, this occurs just before a major trending phase begins.

• Being able to effectively follow price trends means you need to have the ability to follow a simple set of rules about when to enter, and when to exit.

• Because you will suffer lots of small losing trades, you need to have rigorous risk control.

• You need to accept that individual markets can move from from trending to non-trending phases (or vice versa) at any moment.

• Every so often, price will move in a particular direction much further than anyone can believe.

• There are only two theoretical price targets when trend following - infinity when going long, and zero when going short.

• Once in a profitable trade, there is only one price level you need to concentrate on - your trailing stop. Everything else is noise.

• Your stop methodology should be able to identify when a trend has finished.

• Trading with the trend is conceptually very easy to understand, but psychologically very difficult to master.

• Patience and discipline are key components of a successful trend followers' armoury.

• Trend following encapsulates the principle of cutting losses short, and letting winners run.

• Trend following is boring - depending on your chosen timeframe or parameters, you could go through significant periods of time without any entry signals being given.

• Some of the most profitable periods for trend followers are when they do absolutely nothing, other than let existing trades play themselves out.

Source: http://www.thetrendfollower.com