Trend Following Strategies: How to Buy & Sell Sensex with the Trend

By Direct Margin Academy

Introduction

One of the most powerful truths in the stock market is:

“The trend is your friend.”

Trend following strategies help traders and investors participate in big market moves instead of predicting tops and bottoms. In the Indian market, especially in indices like Sensex, trend following works exceptionally well due to long-term institutional participation.

At Direct Margin Academy, trend following is taught as a low-stress, high-discipline trading approach suitable for beginners and professionals.

What Is Trend Following? (Definition)

Trend following is a trading strategy where traders:

• Buy when the market is in an uptrend
• Sell or stay out when the market is in a downtrend
• Hold positions as long as the trend continues

The goal is not to predict reversals, but to ride the trend.

Types of Trends in the Market

1.Uptrend – Higher highs & higher lows
2.Downtrend – Lower highs & lower lows
3.Sideways Trend – Range-bound movement

Trend following works best in uptrends and downtrends.

Why Trend Following Works Well in Sensex

✔ Sensex represents top Indian companies
✔ Strong institutional & FII participation
✔ Long-term trending behavior
✔ Less manipulation compared to small-cap stocks

Sensex rewards patience over prediction.

Popular Trend Following Strategies

1.Moving Average Trend Strategy

How It Works:

• Use 50 EMA & 200 EMA
• Buy when 50 EMA crosses above 200 EMA
• Exit when trend weakens

📌 Used widely by institutions.

2.Higher High–Higher Low Strategy

How It Works:

• Identify higher highs & higher lows
• Buy on pullbacks
• Trail stop-loss below swing low

📌 Pure price-action strategy.

3.Breakout Trend Strategy

How It Works:

• Identify resistance
• Buy when Sensex breaks resistance with volume
• Hold till trend continues

Best during new market phases.

4.RSI-Based Trend Strategy

How It Works:

• RSI stays above 40 in uptrend
• Buy when RSI pulls back to 40–50

Avoid selling just because RSI hits 70.

How to Buy & Sell Sensex Using Trend Following

Buying Rules:

✔ Trade only in confirmed uptrend
✔ Buy pullbacks, not tops
✔ Use trailing stop-loss

Selling Rules:

✔ Exit when trend breaks
✔ Do not panic on minor corrections
✔ Follow rules, not emotions

Case Study 1: Sensex Bull Run

• Sensex above 200 DMA
• Higher highs & higher lows

Result: Sustained multi-month rally

Learning: Staying invested captures big moves.

Case Study 2: Sensex Trend Breakdown

• Sensex breaks key moving average
• Lower highs formed

Result: Market correction

Learning: Trend following protects capital.

Benefits of Trend Following Strategies

✔ Simple and rule-based
✔ Reduces emotional trading
✔ Captures large market moves
✔ Works across timeframes
✔ Ideal for indices like Sensex

Common Mistakes Traders Make

• Trying to catch tops & bottoms
• Exiting too early
• Ignoring higher timeframe trend
• Overtrading during sideways markets

How Direct Margin Academy Teaches Trend Following

✔ Sensex & NIFTY live chart analysis
✔ Moving average & price action methods
✔ Entry, exit & trailing stop-loss
✔ Risk management techniques

Final Thoughts from Direct Margin Academy

Trend following is not about frequent trades; it is about staying on the right side of the market. When applied to Sensex, it helps traders grow wealth steadily with discipline.

“Big money is made by sitting, not trading.”

Want to Master Trend Following?

Join Direct Margin Academy’s Trend Trading & Index Trading Program

Trade the trend. Control the risk.