Glossary term
Trend Following
Systematic strategy that buys breakouts and sells breakdowns, assuming trends persist longer than efficient-market theory suggests. The managed-futures industry's canonical approach: momentum + risk parity + small position sizes. Closelook does not run pure trend-following, but the Pattern Scanner's 51-pattern library includes moving-average crossovers, channel breakouts and volatility-breakout entries.
Definition & Context
Trend-following is the oldest systematic strategy in existence. The rules are simple: buy assets that are rising, sell short assets that are falling, size positions by volatility, and accept that the strategy loses money in choppy and range-bound markets in exchange for capturing the largest cross-asset moves. Classic implementations use moving-average crossovers (e.g. 50/200), channel breakouts (Donchian 20-day high) or volatility breakouts (ATR-based).
The strategy delivers a characteristic return profile: long flat periods punctuated by large gains during regime shifts. Managed-futures trend followers (Winton, AHL, Campbell) earned their reputation during 2008 and 2022, when correlated cross-asset moves produced multi-standard-deviation gains. Their weaknesses are symmetric: 2011–2019 was a brutal decade for trend as central-bank liquidity muted macro trends.
Why It Matters for Investors
Closelook is not a trend-follower, but roughly one-third of the 51 patterns in the Directional Alpha library are trend-continuation signals: Golden/Death Crosses, channel breakouts with volume, Linear-Regression-Channel expansions. The Pattern Scanner surfaces these daily across the Rubin/HALO/Euro-AI universe after the US close. Users running a blended portfolio often allocate 10–20% to trend-style exposure as an uncorrelated return stream.
Related Concepts
Trend Following lives and dies with Golden Cross-type signals and LRC breakouts; it performs best when Market Regime is trending and worst in chop.