| Trend trading is one of the most effective stock | | | | If the stock is not making higher highs and higher |
| trading strategies. It is also one of the simplest | | | | lows, then the trend has not yet been established. It |
| methods. Trend trading is a proven way to earn | | | | is also important to analyze the trend of the sector. |
| profits since it has been established that for years | | | | While back testing my trading strategies, I found |
| the markets have moved in trends. With a trend | | | | much better results when trading with the trend of |
| trading system, you can take advantage of both the | | | | the sector ETF as well. |
| ups and downs of the market and profit in both | | | | Exiting a Trade |
| environments. | | | | Get out of your trade once the trend is broken! Cut |
| Trend traders take advantage of long term moves | | | | your losses, and let the long rides make up for these |
| that play out in the stock market. Traders that use | | | | small losses. You can re-enter your trade once the |
| this method do not try to predict the future direction | | | | trend has been reestablished. |
| of the market. They simply jump in and enjoy the | | | | Risk Management |
| ride. | | | | Trading size should be reduced in periods of high |
| Determining the Trend | | | | volatility. It is very important to preserve capital until |
| Moving averages and channel breakouts can be used | | | | a more positive price trend reappears - not only in |
| to determine the general direction of the market. | | | | the security that you are trading, but the overall |
| The easiest way is to open up a daily price chart and | | | | market as well. |
| apply the simple moving average. The direction of | | | | Use the Trend of the Overall Market |
| the moving average can be used to determine the | | | | Don't try to fight the trend of the overall market. If |
| direction of the trend. It is important to use multiple | | | | the S&P is in a strong uptrend, it would be much |
| time frames when determining this direction. In | | | | riskier to short stocks than it would be to buy |
| determining an uptrend, I like to make sure that the | | | | stocks. Here is my general rule: If the 10 day simple |
| 10 day simple moving average is greater than the 20 | | | | moving average of the S&P is greater than its 30 |
| and 30 day moving average. | | | | day exponential moving average, I'm long. If not, I'm |
| Entering a Trade | | | | short. |
| Don't try to catch the bottom! Wait until the trend | | | | The most important thing to remember is to |
| probably establishes itself before entering the trade. | | | | ALWAYS trade with the trend! |