Zero-Based K-Line Learning | 8 Trend-Following Trading Rules
Rises and falls have trends; understand the language of prices;
Buying and selling have signals; say goodbye to gut-feeling Trading.
Through the previous two lessons, we've learned about trends and their classifications, and how to judge the direction and strength of trends.
In this lesson, we'll learn trend-following trading rules.
I. Trend-Following Trading Rules
Think about it: can we predict the future?
The Twenty-Four Solar Terms, weather forecasts, high and low tide times... are we predicting the future?
Take the Twenty-Four Solar Terms, for example. Originating in the Yellow River basin, it's a meteorological pattern developed and improved by ancient Chinese working people through centuries of observation. Perhaps you've understood: we're not truly predicting the future; this is just pattern speculation based on massive data analysis.
Technical analysis is likewise not prediction or fortune-telling. It's the summary and speculation of trading market patterns by investment masters through long-term statistics, observation, and verification.
Currently, the vast majority of technical analysis executes "trend-following strategies." So what's the magic of trends? What relationship exists with prices?
The relationship between price and trend is like a dog and the person holding the leash. Price movement trajectories are like a dog running around its owner—hard to predict. The trend is like the person holding the leash—direction is clear. Find the person's tracks, and you can easily determine the dog's location.
The chart shows market analysis from the 2017 Bitcoin bull market. The yellow line connects the closing average prices of every 20 candlesticks. The yellow line is like the tracks of the person holding the leash, with prices always oscillating upward around the yellow average price line.
Why are trend-following strategies effective? Trends are the game result of market combined forces, supported by factors like supply and demand relationships, capital flows, and investor psychology. These factors won't be easily changed in a short time.
The continuation phenomenon of trends is like a car traveling at high speed.
Car acceleration is like the start and formation of a trend. Before coming to a complete stop, a high-speed car will decelerate and move some distance in the original direction. Similarly, before a trend completely ends, prices will continue moving in the original direction for some distance.
Through analogy, we'll use a real case to explain the principles of trend-following strategies.
Screenshot from OKX BTC/USDT 1-hour chart. Based on methods learned in previous lessons, determine points A and B, draw a downtrend line, and confirm at point C that the downtrend line is valid. From A to C is the formation and confirmation process of the downtrend, like a car accelerating in a certain direction. After point C is the continuation process of the downtrend until it ends, like a high-speed car coming to a complete stop.
This concludes our explanation of trends. Next, we'll share K-line pattern analysis like "bottom fishing" and "escaping the top."
Disclaimer
This article may contain product-related content not applicable to your region. This article is intended to provide general information only and assumes no responsibility for any factual errors or omissions herein. This article represents only the author's personal views and does not represent OKX's views. This article is not intended to provide any recommendations, including but not limited to: (i) investment advice or investment recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins) involves high risk, may fluctuate significantly, and may even become worthless. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For questions about your specific situation, please consult your legal/tax/investment professional. Information appearing in this article (including market data and statistics, if any) is for general reference only. While we have taken all reasonable precautions in preparing these data and charts, we assume no responsibility for any factual errors or omissions expressed herein. © 2025 OKX. This article may be reproduced or distributed in its entirety, or excerpts of 100 words or less from this article may be used, provided such use is non-commercial. Any reproduction or distribution of the entire article must also prominently state: "Copyright © 2025 OKX. Used with permission." Permitted excerpts must cite the article title and include attribution, such as "Article Name, [Author Name (if applicable)], © 2025 OKX". Some content may be generated or assisted by artificial intelligence (AI) tools. Derivative works or other uses of this article are not permitted.
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