{"id":14718,"date":"2023-03-31T17:57:46","date_gmt":"2023-03-31T14:57:46","guid":{"rendered":"https:\/\/roboforex.com\/blog\/?p=14718"},"modified":"2026-05-26T10:55:39","modified_gmt":"2026-05-26T07:55:39","slug":"how-to-trade-the-sp-500-trend-following-strategy","status":"publish","type":"post","link":"https:\/\/roboforex.com\/blog\/2023\/03\/31\/how-to-trade-the-sp-500-trend-following-strategy\/","title":{"rendered":"How to Trade the \u201cS&P 500 Trend Following Strategy\u201d"},"content":{"rendered":"\n

In this article, we will look at the long-term indicator trading \"S&P 500<\/a> Trend Following\" strategy<\/strong>. We will find out how it works, how it is used in trading, and what indicator signals<\/a> it is based on. We will also list its advantages and disadvantages.<\/p>\n\n\n\n

<\/span><\/a>How the S&P 500 Trend Following strategy works<\/span><\/h2>\n\n\n\n

This long-term strategy implies trading the S&P 500 (US 500) stock index in the direction of the current market trend. Note that this index is probably the best-known and most popular stock index in the world. It includes the stocks<\/a> of the 500 largest companies traded on the US stock market and serves as a barometer of the state of the US stock market.<\/p>\n\n\n\n

Renowned investors and asset managers Meb Faber and Paul Tudor Jones are the creators and popularisers of the S&P 500 Trend Following strategy. They presented a rather simple and at the same time effective trend-following trading system for the S&P 500 Index, which is based on the signals of the 200-day moving average<\/a>.<\/p>\n\n\n\n

The S&P 500 often shows a steady uptrend during periods of a rising stock market. The indicator should help to identify the beginning of the next long-term trend and give investors a signal to buy to profit from the index growth.<\/p>\n\n\n\n

To describe the strategy simply: when the S&P 500 is above the 200-day moving average, the trend is upward, and it is a good time to buy the index; when it is below the indicator line, the trend changes, moving downward, and all positions must be closed.<\/p>\n\n\n\n

\"200-day<\/a>
200-day Moving Average on the S&P 500 Index price chart<\/em><\/figcaption><\/figure>\n\n\n\n
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<\/span>How to install the Moving Average indicator<\/span><\/h2>\n\n\n\n

The Moving Average (MA) has long established itself as a simple and effective tool for trend analysis. The indicator is included in most modern trading terminals where it is displayed directly on the price chart.<\/p>\n\n\n\n

To set the Moving Average in the popular MetaTrader 4<\/a> and MetaTrader 5<\/a> trading platforms, follow these steps:<\/p>\n\n\n\n

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  1. Open the terminal and log in to your account.<\/li>\n\n\n\n
  2. Select the S&P 500 from the list of available financial instruments and add it to the chart.<\/li>\n\n\n\n
  3. From the main menu, click on Insert, then on Indicators<\/a>, then on Trend, and select Moving Average.<\/li>\n\n\n\n
  4. Select the period 200, the line colour and width, and the MA: Simple, and click OK to apply the settings and close the indicator settings window.<\/li>\n<\/ol>\n\n\n\n

    As a result, a 200-day moving average will appear on the price chart, which will be used to identify the current trend and search for trading signals according to the strategy.<\/p>\n\n\n\n

    \"Setting<\/a>
    Setting the Moving Average indicator<\/em><\/figcaption><\/figure>\n\n\n\n

    <\/span><\/a>How to use the strategy in trading<\/span><\/h2>\n\n\n\n

    The S&P 500 trend-following strategy trades in one direction only – to buy the asset. Its trading principle is simple:<\/p>\n\n\n\n