Trend following treats market momentum — "what rises tends to keep rising, and what falls tends to keep falling" — as the basis for trading. Unlike value investing, which estimates a fair future value and tries to buy cheap, trend following climbs aboard stocks that are already advancing strongly and holds until the trend breaks. It looks simple, but nearly a century of U.S. market data and the real records of many trading champions back up the validity of that simple principle.
Why Strong Stocks Get Stronger
A stock price reflects a company's results and expectations, but that reflection doesn't happen all at once. When strong earnings come out, large pools of capital — institutions and foreign investors — accumulate over days and weeks. Through that process the price doesn't jump straight to fair value; it climbs in stages, and a stock making new highs along the way signals to the market that it is "safe to keep buying." Strength ends up breeding more strength in a positive feedback loop, and that is the fundamental reason a trend persists for a stretch of time.
Conversely, a laggard — however undervalued it looks — can crawl along the bottom for a long time if no one is buying. That's exactly how a stock bought just because it "looks cheap" becomes the value trap that only gets cheaper. Trend following sidesteps this problem head-on, because it targets only stocks the market has already voted "strong."
The Two Pillars of Trend Following: Selection and Risk Management
The outcome of trend-following trading comes down to two things: first, which stocks you target, and second, how quickly you get out when you're wrong. Interestingly, the entry technique itself matters less than people think. The same breakout buy has a high success rate on market leaders but tends to end as a fake breakout on laggards.
So trend-following traders put most of their effort into narrowing the pool of strong candidates first. Mark Minervini's 8-condition Trend Template is a well-known checklist for filtering that pool mechanically. A stock whose moving averages are aligned and rising, whose price sits near its 52-week high, and whose relative strength beats the market — one that satisfies all three at once — is a genuine leader in a Stage 2 uptrend.
Why Risk Management Comes Before Profit
Trend following is, at its core, a "win big when right, lose small when wrong" strategy. Because a single strong trend can more than cover many small losses, the reward-to-risk ratio matters far more than the win rate of any individual trade. To make that work, you must set a stop the moment you enter and have the discipline to exit without emotion once the trend breaks.
Where Trend Screener Fits In
Trend Screener automates the first step of this process — narrowing the pool of strong candidates — every trading day. It applies the same 8 conditions and weighted Relative Strength (RS) formula to every U.S. and Korean stock and shows today's strongest-trending leaders together with their rank. The exact computation rules are on the Methodology page. Entry timing and risk management are your own call, but for the starting point — narrowing down which stocks to consider by an objective rule — the screener is a powerful tool.