Sunrise Capital gives trend following an explanation:
“The objective is not to attempt to buy lows and sell highs, but rather to buy market strength and sell market weakness. The underlying theory is that markets periodically exhibit nonrandom price movements or trends that are persistent and can be exploited by an approach that does not forecast, but simply follows price trends. Trend-following models apply quantitative analysis and/or pattern recognition algorithms to the daily price data of the market being traded, which serves as the sole data input to the model. This approach, commonly referred to as technical analysis, is based on the concept that all fundamental or external data that might impact a specific market is already reflected in the current price.”
Sunrise Capital