Trend Trading

In simplest terms, Trend Trading is a style of trading where a trader identifies an instrument has begun trending up or down. The trader enters in the direction of the trend, expecting it will resume. He or she will stay in his position for weeks months or even years until he concludes the trend has ended. At which time the trader will exit the trade and wait for a new trend to develop or find another instrument that is trending to enter.

A trend trader will have rules for entering or exiting trades. For example: a stock has begun a strong uptrend. a trader may wait for a pullback to a moving average, support level or a fibonacci level to enter the trade in order to get the best price. Some traders will wait for the stock to consolidate sideways and buy when the stock breaks to a new high above the consolidation area.

Exit rules can vary as well. A trend trader may exit the trade if it falls below a moving average, breaks an important support level or declines in price buy a certain percentage.

This style of trading is excellent for people who have patience and/or cannot be involved in trading the markets every day. It is probably the least stressful type of trading. It gives the trader a lot of time to analyze the trade before making a decision to enter or exit.

Trend Trading Chart