Benefits of Long Term Trend Following Strategy in Futures Trading
A beginner trader usually chooses short-term strategies with the goal of achieving instant rewards. There is no denying that short-term strategies can help you generate profits in futures trading, but Long-term trend following can also be equally profitable. The concept in following long-term strategies is to make fewer transactions while generating bigger gains. There are many benefits to choosing this method to drive profits.
There are many advantages of choosing Long term trend following in futures trading. To start with, it is easy to understand.
1. Keeping Track of All Movements
With this strategy, you are least likely to miss a big move. Whenever the market turns from down to up, typically the indicator is going to give you the ‘buy’ signal. If it is going to be a big movement, your program should certainly give the signal.
2. Large Profit Potential
The profit potential in Long term trend following strategies is usually much bigger. The advantage here is that even when the reliability of the strategy is less than 50%, you are still looking forward to profits. This is made possible by increasing the average size of your winning trades compared to the amount of losing trades. If you can do it right, a single trade may be all that is required to generate your annual profits.
3. Cost Savings
Another advantage of choosing this strategy is the cost savings over short-term, more frequent trades. Longer term trend-following indicators reduce the transaction costs significantly. Once you add up the costs of multiple and more frequent short-term trades, you may realize that you are not making much profit.
4. Cut your losses and let your profits run
When you use the Long-term trend following strategy, you can use the traditional and proven
concept of cutting your losses and letting your profits run. Traders generate some of the best returns when they stay with trending markets for months and possibly years with a trend following system. This helps you get into a position at a much cheaper
In this case, the advantages work both ways. You can exit your position if the trend stops, thus
reducing your losses. On the other hand, if the trend is continuous, you can make a profit that is
several times the amount that you risked when you entered the trade.
Thus, there are many advantages of using Long term trend following strategy. Popular indicators can help in designing your trend strategy and Wisdom Trading can assist in customizing the strategy to your own goals based on capital size, risk tolerance and market selection.
Futures Trading involves substantial risk and is not suitable for all investors. Past performance is not indicative of futures results