Definition Trend Following Strategy is an investment approach that aims to capitalize on the momentum of a stock, commodity or other financial instrument by buying when prices are rising and selling when prices are falling. This strategy relies on the idea that assets which have been trending in a particular direction will continue to do so for some time, making it a popular choice among traders and investors alike.
Definition An underlying asset is essentially the foundation upon which financial derivatives are built. It can be any asset, including stocks, bonds, commodities, currencies or indices. The value and performance of these derivatives depend on the fluctuations of the underlying asset. This concept is pivotal in finance, especially when dealing with options and futures contracts. Types of Underlying Assets There are several types of underlying assets that traders and investors might encounter: