The Trend Is Your Friend: An Easy Guide To Trend Trading
On a trader’s journey, the intrepid investor will learn to gather as many tools as possible. These will be the learned skills via which the best path to the most profitable trade will be found. And one of the most vital to have in the toolkit, is knowledge on trend trading.
When it comes to trading, the trend is your friend. But what exactly is a trend and how do you identify one? In this easy guide, we’ll cover everything you need to know about trend trading, from what sustains a trend to how you can start trading them yourself.
What is a Trend?
So, what is a trend? Simply put, a trend is the general direction of price movement. Trends can be either up (bullish), down (bearish), or sideways (neutral).
What Sustains a Trend?
What sustains a trend is underlying momentum. This can be caused by many factors, such as changes in fundamentals or sentiment. Once a trend has begun, traders tend to jump on board in the hopes of riding it to profits. This creates even more momentum, which can sustain the trend even further.
Indicators For Identifying a Trend
Indicators are one of the best ways to identify a trend. Some popular indicators used by traders are moving averages, support and resistance levels, and the relative strength index (RSI).
Trend Entry and Exit Point Guidelines
When it comes to trend trading, there are two key points to keep in mind: entry and exit. Entry is simply when you decide to enter a trade. Exit is when you close out your position, either for a profit or a loss.
There are no set rules for how to enter or exit a trend trade. However, there are some guidelines that can help you make decisions. For example, many traders use trendline breakouts as their entry point. They may also wait for a retracement to occur before entering, in order to get a better price.
As for exits, some traders choose to take profits at key levels, such as previous support or resistance levels. Others may use trailing stop losses, which automatically close out their position if the trend reverses.
If you’re interested in trend trading, the best way to start is by using a demo account. This is where you practice making trades without actually putting any money on the line. That way, you can learn how to identify trends and execute trades without risk. Once you’re comfortable, you can start trading with real money. Remember, the trend is your friend – by following these guidelines, you can start trend trading and potentially reap rewards.
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