Which trading system type is characterized by buying high and selling higher?

A trend-following system is characterized by the principle of buying high and selling higher. This approach is based on the idea that securities that have been rising in price will continue to rise, allowing traders to capitalize on momentum. Trend followers analyze price movements and often use technical indicators to identify the direction of trends, entering positions that align with these trends. By doing so, they aim to capture gains as the price continues to ascend, reinforcing the strategy of buying high with the expectation that the upward movement will persist.

In contrast, other types of trading systems operate under different principles. For instance, a reversion to the mean strategy expects that prices will eventually return to a historical average, implying buying low after a price drop or selling high after a price surge, rather than consistently buying high. Exogenous signal systems rely on external indicators or events unrelated to price movements for trading decisions, while pattern recognition systems depend on identifying specific chart patterns to predict future price movements. These distinct focuses differentiate their strategies from trend-following systems, clearly highlighting why the focus on buying high and selling higher aligns with trend-following techniques.