What is Trend Trading?
Trend trading the financial markets is no longer only for the Wall Street big shots or the highly educated bankers in Canary Wharf. These days with the internet and the prevalence of online brokers providing access to the markets, barriers to entry are so much lower. No longer are the days of manic trading pits and having to pick up the phone to take a trade. Now, the time between first hearing about trading to placing your new business can be a matter of hours.
Is a double-edged sword because, on the one hand, it opens up so much opportunity. On the other, it presents a danger of financial ruin to the ignorant. (read my blog post on why so many retail traders fail). Day trading and scalping are popular ways to trade the markets from home. However, the success rate is astonishingly low. Day trading and scalping are when a trader is taking multiple positions per day on intraday time frames. These methods are time-consuming, stressful, and discouragingly challenging to find success.
In this paper, I will clarify how long-term trend trading works in comparison with other types of trading and its benefits and difficulties.
How does the business of trend work?
Rather than being in and out of various roles per day, I’m aiming for months at the moment to hold the same trades. Or as long as it’s trendy what I’m trading. I won’t be selling it if an asset isn’t trending.
A bullish trend is described to get technical by price action making more significant and higher lows. When price moves up, the greater heights, when price pulls back, generally to some assistance or resistance, the higher lows . would be followed up by another leg to create a greater fresh one. For a bearish trend, the reverse is true.
Examples of trends
NVDA improved by more than 700 percent from my watchlist when it first appeared. To make significant returns to your trading account, you don’t need to catch this whole step.
In 2017, Boeing was another strong trend. Boeing continued to trend for another 1.5 years after appearing on my watchlist, returning 250 percent.
It was after some of these trends backtesting that gave me that moment of ‘ aha. ‘ From there on, I was hooked on trend trading.
Time frames higher
You would probably be trading from intraday time frames with day trading. Often charts of 15, 30 or 60 minutes. Sometimes the scalping is smaller. However, higher time frames use due to the long-term nature of trend trading. I’d begin my monthly time frame analysis. The monthly graph will demonstrate to me how and if the asset I am analyzing has trended in the past. The monthly will also show me any substantial amounts of assistance or opposition to be conscious.
Next, I’m going to look at the weekly timing. The weekly will give me a clearer image of the present trend and the trading bias. Once satisfied with the weekly, I will migrate down to the daily time frame that will confirm the trading bias and provide me with a clearer image of the price action.It’s the daily time frame from which I’m doing business. There’s no need to look at any time frame lower than the regular with trend trading.
Below is an instance of my configuration to chart various time frames. For my charting, I use TradingView.
The benefit of using higher time frames and long-term trading is the time it takes to finish your trading routine. With day trading and scalping, you are likely to look at price graphs every day for several hours. Now if you want this from a trading career, it’s fantastic.However, if at the beginning, you do not have the resources to create a living from trading and thus have a full-time job, this is not realistic.
I base all my choices with trend trading after the trading session (or the next morning) is finished. Therefore, Monday-Friday, my trading, and portfolio management generally require me less than 20 minutes a day.I spend about 2 hours doing my in-depth study on the weekend ready for the week ahead. Implies I have less than 4 hours of the trading work week. Not only is this possible for anyone working complete-time, but if you achieve a point where your trend trading can substitute your 9-5 work, it also gives you a feeling of time liberty.
Which markets are best for trading in trend?
It is possible to apply trend trading policies to any liquid market and trends. Most traders will encourage you to trade just a couple, like the majors, of currency pairs. Although doing this is more appropriate today traders. Only trading a few tools with trend trading will massively restrict your ability.
At the same moment, not all markets are trendy. But my goal is to follow market-to-market economic cash and trends. U.S. and U.K. stocks, Forex, and Commodities are the primary market classes I trade. All of these mixed asset classes give trade thousands of potential tools.
I use scanners and charting software to analyze which are the best of the most excellent possibilities at any moment to combat this amount of applicants. In doing so, I can objectively decide which transactions to take within my restricted tolerance of danger. Making the best setups of trade will stack in my favor, the odds of a lengthy and profitable trend.
When I first found the notion of trend trading, I wondered how from the higher time frames you could make suitable return trading. I considered it to be too slow and unprofitable. But how mistaken I was.
It started to create sense once I grasped trend trading risk management. You are likely to have a risk distribution of about 10-16 percent of your trading account as a trend trader. This is personal preference and depends on the adversity and size of your account. This 10-16 percent is not all on one trade now, of course. This is diversified by 1 or 2 percent each across several trades on distinct trends. So if you have a few notable trends that will perform well for months at the moment, the returns will come. However, until I was taught compounding, I was not sold on the concept yet.
When you enter first trades on the most beautiful setups, compounding or scaling in is. Then you continue to add positions to these trends as the influential performers continue to create fresh higher and lower lows. As your new compound is triggered, the loss of your prior stop positions is shifted to enter to eliminate this danger. So now, with only 2 percent danger, you have 4 percent working for you. If it enables, I will add up to a maximum of five roles in one trend. Implies that with only my original 2 percent downside, I could have 10 percent working for me in position sizing. Multiply this over; however, many dominant performance trends I’m trading, and you can comprehend how powerful and effective trend trading can be.
Trend trade challenges
In my view, trend trading is the best way in this day and age to trade and create wealth. That said, it comes with its difficulties. But there’s nothing worth it simple right?
First, the paydays are not regular because of the long-term nature of it. Expect more uncommon paydays. You can gain cash on a weekly or monthly basis with day trading. You’re going to go months at the moment without revenue with trend trading though. Could be because developments do not always occur. Or because it takes months to mature your most lucrative trades. Remember that unrealized revenues or revenues from paper are not yours until the trade is closed.
Psychology of traders is the primary cause of failure
Mindset is the next trend trade challenge. As stated, your most lucrative businesses take to mature what feels like an era. Unfortunately, you’re likely going to take some losses at that moment. That’s just a component of any style of trading. Losing trades usually don’t last long, so it can feel like you’re losing continuously before profit closing the lucrative trades. Remember, for those few slow burners who steadily accumulate earnings, and you need patience. To tackle this, you need to create the psychology of your trader and train yourself to be patient and disciplined with your business.
Compounding is the last challenge with trend trading. Compounding is vital to your trading account’s exponential growth, but it can make your trades extremely heavy. By this, I imply that everything is excellent when the trends move in your direction. Healthy earnings should continue accumulated across various positions per pattern. Trends, though, is not moving in a straight line. The paper profits you initially had can rapidly disappear when the pullbacks arrive. You are managing your danger, of course, so you understand your potential for downside. That said, it can be upsetting to see your paper earnings vanish if you involve your feelings. If you trad numerous stocks at once, due to the nature of how the stock market operates, its probably the pullbacks will come together as well.
You need to create your trader psychology again to overcome this. Leave on the sidelines, your feelings, and your ego. You’re not going to leave the market with paper or unrealized revenues. You need to concentrate on where your loss of trailing stop is due to how much profit is safe in realistic terms.
Trading from your mobile or using free broker software can hamper many fresh traders as well. Use professional trading software with the correct trend trading capacities to stack the odds of achievement in your favor. I use TradingView as my software for trading.
Be the intelligent money
Do not let yourself be discouraged by the above problems. I want to be frank about the implications. Other trading styles also come with their disadvantages, but I think the benefits of trend trading far outweigh any different form of trading. It is possible to become a successful trend trader with the correct mindset and time. You can create wealth with it and earn time with your design to live life!
Learn to do business for yourself
I’m a member of the society of Dynamic Trader. A Dynamic Trader is a place where you will get one-on-one instruction on all you need to implement lucrative trend trading policies as well as our proprietary trading instruments — taught by mentors who are effectively trading these strategies.
TDT community is an internet platform after being trained where the magic occurs. It is a location where you will find videos of education, monthly webinars, weekly video analysis, and applicants for daily trade.
The most precious element of TDT has this online community where questions are answered, and assistance is provided. This was the amost excellent investment I’ve ever made, by far.