This is one of the most straightforward strategies and involves following market trends. A trend is where a price is moving in a certain direction (for example, up or down).
When the trend is going upwards, the automated system may take a long position – buying in anticipation of the stock, currency or commodity rising in value.
When there is a downward trend, the system is likely to go short, which means selling off the security to purchase it again later at a lower price.
Automated systems are capable of comparing current data with historical data to predict how likely it is that a trend will continue (rather than reverse).