Jasmine Birtles
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What Is Trend Investing? A Complete Guide for Beginners
Ruby Layram
6th Feb 2026
Trend investing is one of the simplest, and most popular, investment strategies used by both professional traders and everyday investors.
Instead of trying to predict the market or hunt for “cheap” stocks, trend investors focus on one powerful idea: Buy assets that are already going up, and sell them when the trend turns.
In this guide, we’ll explain exactly what trend investing is, how it works, its pros and cons, and whether it could be right for you.
Also read: How to build and investment strategy in 5 steps
What Is Trend Investing?
Trend investing (sometimes called trend following) is an investment strategy that aims to profit from long-term market movements.
The goal is simple:
- Buy assets that are in an upward trend
- Avoid (or sell) assets in a downward trend
Rather than guessing where prices will go next, trend investors react to what the market is already doing.
If a stock, commodity, or index is rising steadily over time, trend investors assume it may continue rising until there’s evidence the trend has changed.
This strategy can be used for:
- Shares
- ETFs
- Commodities (like gold or oil)
- Cryptocurrencies
- Index funds (FTSE 100, S&P 500, Nasdaq, etc.)
How Does Trend Investing Work?
Trend investing relies on price movement and data rather than emotion or opinions.
Investors typically use:
- Moving averages (such as 50-day or 200-day averages)
- Price charts
- Momentum indicators
- Rules-based systems
For example:
- If a stock is trading above its long-term moving average → it may be considered “in trend”
- If it drops below → that could be a sell signal
Trend investors don’t try to buy at the very bottom or sell at the very top. Instead, they aim to capture the middle of a big move.
Trend Investing vs Other Strategies
Trend Investing vs Value Investing
- Value investing looks for “cheap” stocks based on company fundamentals
- Trend investing looks for rising prices regardless of valuation
Trend Investing vs Buy-and-Hold
- Buy-and-hold means staying invested through crashes
- Trend investing steps aside when markets fall
Trend Investing vs Day Trading
- Trend investing focuses on long-term trends
- Day trading focuses on short-term price movements
Trend investing is often described as: “Letting your winners run and cutting your losses quickly.”
Why Do People Use Trend Investing?
Trend investing works because markets tend to move in cycles:
- Bull markets
- Bear markets
- Sector booms
- Commodity supercycles
Human behaviour drives these trends:
- Fear
- Greed
- Herd mentality
- Media hype
Trend investors take advantage of this by:
- Removing emotion from decisions
- Following clear rules
- Staying invested only when conditions are favourable
Many famous investors and hedge funds use trend-following strategies, including managed futures funds and systematic trading systems.
Who Is Trend Investing Suitable For?
Trend investing may be ideal if you:
- Prefer rules over guesswork
- Don’t want to analyse company accounts in depth
- Like data and charts
- Want to avoid big market crashes
- Are happy holding investments for months or years#
- Want a disciplined approach
- Don’t panic when prices move
It’s especially good for:
- Busy investors
- Logical thinkers
- People who struggle with emotional investing
- Those who want a system rather than “tips”
What Are the Advantages of Trend Investing?
Trend investing is popular for several reasons:
1. Emotion-free investing
Trend investing removes gut feelings and replaces them with rules.
2. Can avoid big losses
By exiting when trends turn down, investors may avoid long bear markets.
3. Works across many markets
It can be used on:
- Shares
- Funds
- Commodities
- Crypto
- Indices
4. Simple in concept
“Follow the trend” is easier to understand than complex valuation models.
What Are the Risks of Trend Investing?
Like all strategies, trend investing has downsides.
1. False Signals
Markets can briefly dip then recover, causing unnecessary selling.
2. You Won’t Buy the Bottom
Trend investors wait for confirmation, meaning they may miss the first part of a rally.
3. Requires Discipline
You must stick to your rules, even when it feels uncomfortable.
4. Can Underperform in Sideways Markets
If prices move up and down without a clear direction, results can be choppy.
Example of Trend Investing (Simple Version)
Imagine you invest in a global stock market ETF.
You decide:
- Buy when price is above its 200-day moving average
- Sell when price falls below it
Over time:
- You stay invested in bull markets
- You move to cash during crashes
- You re-enter when the trend turns positive again
This removes panic decisions and replaces them with structure.
Do You Need Special Tools?
Not really. Many investors use:
- Free charting tools (Yahoo Finance, TradingView)
- ETFs
- A stocks & shares ISA
- Basic technical indicators
Some use automated systems or managed funds that follow trends for them.
Is Trend Investing Better Than Buy and Hold?
Not necessarily, it’s just different.
Buy-and-hold:
- Simpler
- Fewer trades
- Long-term compounding
- Must endure crashes
Trend investing:
- More active
- May reduce big losses
- Requires monitoring
- Needs discipline
The best choice depends on your personality and goals.
Is Trend Investing Good for Beginners?
It can be, if you:
- Learn the basics
- Keep it simple
- Don’t overtrade
- Use diversified funds or ETFs
- Stick to long-term trends (not daily trading)
It can be a great way to avoid emotional mistakes and stay rational.
Final Thoughts
Trend investing is about:
- Following the market, not predicting it
- Staying invested when things are rising
- Stepping aside when things turn risky
- Using rules instead of fear
It suits people who want:
- A structured approach
- Less stress
- More discipline
- A system rather than stock tips
Like any strategy, it’s not foolproof. But when used consistently, it can be a powerful way to grow wealth over time.
This article is for information purposes only and does not constitute financial advice. All investments carry risk and your capital is at risk.
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