A good business that pays is desirable. If you are wondering where you can best invest your money, trend trading is that place. Trend trading is an approach that gives you the best opportunity to earn better profits. This you can achieve by taking advantage of big market moves.
Introduction to Trend Trading
Trend trading is profitable. However, you need to understand it better if you are to scoop its benefits. You will notice from the onset that there are two main concerns when you are dealing with trend trading. These two concerns are whether the market is trending upwards or downwards.
It is important for you as a trader to correctly identify this prior to trading. It will determine whether you get profits or not. Once the trade is placed, you are bound to stay in the trade until such a time when the trade has changed.
Advantages and Disadvantages in Trend Trading
Like in all other businesses across the globe, trend trading has both advantages and disadvantages. So some of the advantages and disadvantages are as follows:
One of the benefits of trend trading is that you will never miss an opportunity. Major moves will not pass you by. You will be able to notice by signals as soon as an upward direction is observed in the market you are following. Moreover, your long term trend indicators have a lower transaction cost. This helps you save more money.
As a Forex trader, you have the opportunity to get onboard whenever there is any major move in any Forex market. As a result, you stand a better chance of making very lucrative profits from just one trade. With trend trading, you are not restricted as to how much money you can use to trade. In fact, you are free to set your limits.
One particular disadvantage in trend trading is that no indicator is able to detect whether a given profit is likely to be long term or short term. Trend signals can also turn against you in some instances. This may lead to some small losses. Nevertheless, all these are things you can overcome – many have.
Any kind of trade has advantages and disadvantages, and that is no secret. The difference is whether advantages outweigh the disadvantages and vice versa. For trend trading, the advantages outweigh the disadvantages. With a little caution, you stand a better chance of earning profits.
Trend Trading Indicators
To identify trading opportunities, you need to have a clear reading of the indicators. Indicators will help you simplify information.
Moreover, indicators will also provide you with trend trade signals. You can use these indicators on all time frames. Combining various indicators all at the same time is even better. Depending on just one is not appropriate if you are to maximize your gains. Reading these indicators is very simple. It is as simple as placing them on the chart. Some of these indicators include;
- Moving Averages
- On balance volume
- Moving Average Convergence and Divergence
- Relative Strength Index
These four indicators are the most important though there are still other indicators in trend trading. If you master these four, then you are good to go.
There are various ways in which you can use the moving averages to your advantage. You can observe the angle of the moving averages. This will help you know if the price is trending if the moving averages appear to be horizontal for quite a long time. Expert forex traders understand this better. You ought to note that moving averages are just indicators. They are not meant for prediction purposes. They just help you to see what the price is over a given period of time.
On balance volume
As a trader, one thing you must consider is volume. It is one of the most important indicators. On Balance Volume (OBV) accumulates a lot of volume into just one line indicator. Volume confirms the trend. Any price that comes up in trend trading is accompanied by on balance volume.
In the event that the volume is on the rise then be sure that the price will rise too in due course. And if on balance volume is flattening or even falling then the price is almost at the peak. When the price is
approaching the bottom on balance volume flattens too.
Moving Average Convergence and Divergence
The (MACD) is an oscillating indicator. The side on which it lies with reference to the zero is vital. That is
either to the negative or positive side. The best and most promising side for making a purchase is when the MACD is on the positive side. That is above zero for a sustained period of time. A good sell signal is when you notice that it has crossed below zero.
Relative strength index
Relative strength index is another oscillating indicator. However, its movement is between zero and 100. It does not go below zero. In this regard, you will find that it provides information that is slightly different from what you get when using MACD.
Trend trading is the best laid-back from of investing. Once you get to understand the indicators in market trends, you can easily allocate your time and money towards the trade with the least effort and expertise. You can also hire a trading agent to inform you on whether upward or downward trends are likely to persist to safeguard against losing your money. To be successful trend trader, it is necessary that you make little but consistent profits over a long period of time this would improve your confidence in this form of trade and increase your capital pool that would be useful in future short-term and profitable pursuits. Register for trend trading today and maximize your potential to earn. You are guaranteed that it would be as enjoyable as it will be profitable.