An article currently published on Toyo Keizai Online: Trend following is directly linked to capital risk management

Good morning, this is Matsushita.

The Nikkei stock average started the week with a drop.

The USD/JPY pair started lower and is recovering.

"The most important thing in investing is money management."

In other words, if you are an investor,

I think you understand this well enough.

Money management means balancing profits and losses through control of trade size, entry, and exit.

and

that balance is achieved.

On the other hand

"Trend is your friend."

This is a phrase you may have heard from American super-trader

snapped up by many.

Following the trend works to your trading advantage.

In fact, trend following trades are inherently linked to money management.

In other words, by performing trend following,

money management is automatically carried out.

Why is that?

Trend following trades involve

recognizing the direction of the trend,

and aligning one’s buying and selling with that direction.

Buy in an uptrend and sell in a downtrend.

Here, to explain the nature of trends,

a trend has the property that price movement and time skew in one direction.

An uptrend means a longer duration of rising prices and larger upward movement.

A downtrend means a longer duration of falling prices and larger downward movement.

Therefore, aligning trading with the direction of the trend automatically yields profits greater than losses.

If you can also master trade size control,

you will have achieved the most important aspect of investing: money management.

Trend following is a trade that directly ties to money management and offers an edge.

First, please firmly master trend following.