Trend Trading, is probably one of the easiest techniques for the new trader or investor to understand in the stock market.
In reality, it's actually Trend Following. The advantage of trend following is simple...you never miss a major stock market trends move.
If the stock you are watching turns from a down to an up direction, your trend following indicator must flash a "buy" signal. If it is a strong major move, you will get the signal.
Chart by MetaStock
The astute trend trader must know that if he/she can get on-board a major move, the profits from just one trade can be very lucrative.
In fact, one trade could make your whole year. Once in the trend, the trend trader sits back and enjoys the ride, as long as the stock market trend keeps going in the traders direction. This is commonly known as " letting your profits run ".
First of all, you must confirm that a trend is indeed in place.
Read the section on Trendlines to learn on how to establish and confirm a trend.
Using an indicator such as the Moving Average Indicator is also beneficial when trading a trend.
Long term trading is commonly associated with trend trading.
In his book entitled, Trend Following: How Great Traders Make Millions in Up or Down Markets, Michael Covel reveals exactly how trend followers achieve amazing results.
Using simple, up-to-the-minute charts from top traders, he doesn’t just prove this strategy works...he shows why only a technical system based on following price trends can win over the long term.
Best of all, he shows you exactly how to apply the same strategies in your own portfolio--so you, too, can keep on profiting no matter what happens next!
Huh...you mean they're raising turtles to trade stocks now? Well, it is the new Millennium you know!!
Not quite! But in the early 80's, stock trading guru Richard Dennis reportedly said to his long-time friend William Eckhardt;
“We're going to raise traders just like they raise turtles in Singapore.”
What started as a bet about whether great traders were born or made, became a legendary trading experiment.
Of the thousands of people who who applied, 23 turtles were accepted. Their trading made $100 million for Dennis, leading some to become highly successful traders in their own right.
One of the original Turtle Trader's, Curtis Faith, spells out the Turtle stock trading system in detail. His book Way Of The Turtle: The Secret Methods That Turned Ordinary People Into Legendary Traders, provides a template for trend-trading, or trend following.
Most helpful is the way he breaks down the method into different components.
I don't think it's necessary that one be a dedicated trend trader, or rather a trend follower to greatly benefit from this book. Besides being a fun and interesting read, it is an excellent introduction to the various components of trading methods and how they impact outcomes.
It is also a first-rate integration of the psychology and techniques of trading. Perhaps most important of all, Way Of The Turtle is an illuminating presentation of risk management and consistency, two major contributors to stock market success.
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