The Weekly Trend Following System 

Content Details 

• Summary: This article introduces the weekly trend-following system, designed to capture medium to long-term trends by focusing on weekly price movements. It discusses the setup, key indicators, entry and exit points, and risk management strategies. 

• Target Audience: Intermediate to advanced traders looking to implement a systematic approach to trend-following using weekly data. 

The Weekly Trend Following System 

Key Principles: 

Setup and Key Indicators: 

• Description: Use weekly charts to identify and follow medium to long-term trends. 

• Techniques: Utilize trend indicators like moving averages (e.g., 50-week and 200-week), MACD, and RSI for trend confirmation. 

• Importance: Weekly charts smooth out daily noise, providing clearer signals for trend direction and strength. 

• Example: Apply a 50-week moving average to identify the primary trend and use MACD crossovers for entry signals. 

Entry and Exit Points: 

• Description: Establish clear criteria for entering and exiting trades based on weekly chart analysis. 

• Techniques: Enter trades when the price crosses above a key moving average with confirming signals from MACD and RSI. Exit trades when the price falls below the moving average or when MACD signals a trend reversal. 

• Importance: Ensures systematic and disciplined trading decisions based on objective criteria. 

• Example: Enter a long position when the price closes above the 50-week moving average and MACD histogram turns positive. Exit when the price closes below the 50-week moving average. 

Risk Management: 

• Description: Implement risk management strategies to protect capital and optimize returns. 

• Techniques: Use stop-loss orders, position sizing, and diversification across multiple assets. 

• Importance: Minimizes potential losses and enhances the sustainability of the trading system. 

• Example: Set a stop-loss order at a predetermined percentage below the entry point to limit losses. Adjust position size based on account size and risk tolerance. 

Monitoring and Adjusting: 

• Description: Regularly review and adjust the system based on performance and market conditions. 

• Techniques: Conduct weekly reviews of trades and system performance. Make necessary adjustments to indicators and criteria based on market changes. 

• Importance: Ensures the system remains effective and adapts to evolving market conditions. 

• Example: Review trades every weekend to assess performance and make adjustments to moving average periods or stop-loss levels as needed. 

Practical Application: 

Example in SPX: 

• Initial Assessment: Use weekly SPX charts to identify the primary trend using the 50-week moving average. 

• Entry Signal: Enter a trade when SPX closes above the 50-week moving average with MACD confirmation. 

• Risk Management: Set a stop-loss order 5% below the entry point and diversify positions. 

• Monitoring: Review trades weekly and adjust stop-loss levels based on volatility. 

Risks: 

• Whipsaw Signals: Weekly charts can still produce false signals, leading to potential losses. 

• Trend Reversals: Unexpected market reversals can impact trade performance. 

Indicators for Enhancing Analysis: 

• Moving Averages: Use different periods to confirm trend direction. 

• MACD: Monitor for crossovers and divergences. 

• RSI: Identify overbought and oversold conditions to complement trend analysis.