Why Trend Following Is So Profitable | OVTLYR UNIVERSITY Lesson 5
Introduction
The easiest trades happen when you follow the trend. In this lesson, you’ll learn how to spot trends, confirm them using key criteria, and use the OVTLYR Buy Signal for high-probability setups.
1. Follow the Trend, Don’t Predict
● Goal: Trade in the direction of the current trend.
● Don’t guess where the market will go, react to what it’s doing now.
● Your Edge: Let other people be wrong. You wait until confirmation.
2. Understand Structure: Bullish vs. Bearish
Bullish Structure:
● Higher highs and higher lows.
● Price pushing upward over time.
Bearish Structure:
● Lower highs and lower lows.
● Price drifting downward.
2. 20 EMA
● Slightly slower, good for trend confirmation.
You want to trade with the structure, not against it.
3. Use the Breadth Model to Confirm Trend Strength
● Check if the market has enough participation to support a move.
Green Line = Bull List %
● Shows how many stocks are moving up.
Red Line = EMA10 of the Green Line
● Smooths out the data for clarity.
Buy Signal:
● When the green line crosses above the red line.
● Also: When the green line drops below 25 and starts climbing.
These signal that strength is returning to the market.
4. Sector Filters
● Don’t just follow the market—find strength within sectors.
● If tech is hot and healthcare is weak, you want to be in tech.
Filter:
● Eliminate sectors with bearish breadth.
● Prioritize sectors with bullish breadth and rising greed.
5. The Smart Buy Checklist (The OVTLYR Buy Signal)
Use this exact checklist before entering a trade:
- The market is in a bullish trend.
- Breadth confirms the market is supported.
- The sector shows bullish behavior.
- The stock is showing clear bullish price structure.
- Price is above key moving averages.
- There is momentum: green candles, no major resistance.
- Volume is supporting the move.
- There's no upcoming news or earnings that could disrupt.
- ATR is known for risk management.
6. Trend Continuation vs. Exit
● Once in a trade, don’t guess the top.
● Use the same structure to stay in:
○ As long as higher highs and higher lows continue, stay in.
○ Exit when the structure breaks or when your stop is hit.
“Let winners win and cut losers quickly.”
This wraps up Lesson 5. You now know how to trade with the trend, apply the OVTLYR Buy Signal, and filter out weak setups. In Lesson 6, you’ll learn how to backtest and journal your trades so you can repeat what works and cut what doesn’t.
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