How to Choose a Trend-Following System

"Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world." -- Albert Einstein

Like the candy in Willy Wonka's Chocolate Factory, there is a seemingly endless variety of trend-following flavors in the marketplace. There are trend-following systems that deal with individual stocks, and those that use index funds as their investment vehicle. There are programs that generate signals on a daily or weekly basis, and those that issue signals only a few times a year. Some are based on very complex technical models, while others are quite simple.

How do you find the trend-following system that is right for you?

Look Inside

First and foremost, consider your investment style. Are you an investor or a trader? The traditional definition of a trader paints someone who is focused on exploiting shorter-term market starts and stops, while investors hold a view of the longer-term market direction and prefer to trade infrequently. ...