To The Moon

Trend-following trading is probably the most popular way for traders to generate trading signals. Traders expect that by using a trend-following trading approach they will be able to realize larger winning trades by capturing long-lasting trending movements.

Using a trend-following trading approach, traders first must identify an existing trending market and then they search for trading opportunities that profit when the trend continues.

The first challenge, therefore, is identifying a trending market, The benefit of trend-following trading is that when a trader is able to catch a long-lasting trending move, the profit potential may be very large.

One important aspect of trend-following trading is that traders must realize that as a trend-following trader, you will not be able to capture the whole trending move.

If we are using trend-following, we need to wait for a trend to establish first, by definition, we cannot capture the first part of a trend. This is especially important for new and inexperienced traders, as they might make the mistake of trying to predict when a new trend will emerge before there are actual signals that a trend is present.

This predicting mindset can be dangerous because one would be tempted to take trades too early and then realize unnecessary losses. Waiting for a trend to emerge and being patient are important skills that trend-following traders have to develop.

Here is one of the trend-following trading strategies that I have found it useful after going through it in 2024.

Moving Average Channel

Although many traders believe that price action trading is superior to indicator signals, I would not dismiss the power of trading indicators and even some of the best traders of all times are using indicators in their trading.

In the following chart, I have applied a moving average channel consisting of two moving averages with the same 20-period setting; one is applied to the high and one to the low. You can easily set this up in your Tradingview by opening the settings of the moving averages and changing the “source” to high and low.

Moving averages are the perfect trading tool for trending markets as they often describe the trend effectively. In the screenshot below, we can see that the bullish trend is advancing above the moving average channel.

Trend-following traders are looking for signals when the price is moving back into the channel and then they trade the rejection away from the channel.

As we follow the bullish trend, we can see multiple cases when the price moved back into the channel and then rejected the channel before advancing higher. Such signals may provide great trend-following opportunities.

The benefit of using indicators is that the signals are 100% objective. This might be an objective tool to complement our decision-making with price action trading, especially for new and inexperienced traders who struggle with the subjective nature of pure price action trading. This indicator might be something to add into their list.

But we need to understand also when there is a pullback after the overall uptrend, it is time to look at the flat top consolidation, and we might see a price gap up later.

Technical Analysis - MACD

I will also use MACD to confirm if the current trend will be shifting, looking at the MACD, BBAI is still going through an upside trend, with a slight sign of weakness, but I will continue to monitor and see how BBAI would perform when trading start on 02 Jan 2024.

Summary

This might help us to identify potential entry point if the uptrend began to disappear, and we could see a consolidation formed. Then another new uptrend would appear.

I have used it for my BBAI trade, $BigBear.ai Holdings(BBAI)$ as well as $NVIDIA(NVDA)$

Appreciate if you could share your thoughts in the comment section whether you think trend-following strategy when used with MACD could give us a better edge to find a good entry price for quality stocks.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.