TRADING SYSTEM - Trend Following Systems

  Trend-following systems attempt to do what their name implies.   They seek out the start of a new trend, and they follow that trend until either they are stopped out or the trend changes.  The most popular and effective trend following system is the Moving-Average-Based Systems. 

  Using Moving Averages with two different period (e.g. 5 and 18 period) of the closing price, one can get buy or sell signals to trade the markets.   Below is the actual chart for Crude Palm Oil Futures, Red Arrow showing Sell Signal when the green line crosses above the red line and Green Arrow showing Buy Signal when the red line crosses above the green line.  The Green line is the Simple Moving Average of the closing price with period 5 while the red line has a period of 18.

  The result of the above trades are as follows:

  Using the crossing of two moving averages with different time periods as a trading system, we can see that a profit of 177 points or 177 x RM25 = RM4425 was made in just one month.