Simple Trend-Following Strategy
A daily-timeframe, moving-average-based approach
Overview
This is a mechanical trend-following system built around the 50 and 200 period exponential
moving averages (EMA) on the daily chart. It works across stocks, forex, and crypto. The goal
isn't to catch every move — it's to stay on the right side of the dominant trend with minimal
decision-making and minimal screen time.
Why This Timeframe
The daily chart filters out the noise that dominates lower timeframes. Signals are fewer but more
reliable, slippage and spread costs matter less, and the strategy only requires checking the
chart once a day. Lower timeframes (15m, 5m) demand far more screen time, amplify emotional
decision-making, and are more exposed to noise and execution costs — not recommended
unless there's a specific reason to trade intraday.
Entry Rules
1. Plot the 50 EMA and 200 EMA on the daily chart.
2. Long bias: price is trading above both EMAs and the 50 EMA is above the 200 EMA.
3. Short bias: price is trading below both EMAs and the 50 EMA is below the 200 EMA.
4. Enter in the direction of the bias once the crossover condition is confirmed on a daily
close — not intraday.
Exit Rules
• Exit when the EMAs cross back the other way (50 crosses below 200 for longs, or above
for shorts).
• Optional: use a trailing stop below recent swing lows (for longs) or above recent swing
highs (for shorts) to lock in profit before a full crossover.
Risk Management
• Risk a fixed percentage of account per trade — typically 0.5% to 1%.
• Always use a hard stop loss; never widen a stop once placed.
• Position size is calculated from the stop distance, not guessed.
Why It's Hard Despite Being Simple
The strategy itself is easy to describe but difficult to execute. It involves long stretches of doing
nothing, or sitting through drawdown while a trend develops. Most blown accounts aren't the
result of a bad strategy — they come from abandoning a simple system too early or oversizing
positions. Discipline and consistent risk management matter more than the specific entry rule.