Trend trading – the easiest trading strategy
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Trading online is probably one of the best ways to work from home and make money on a daily basis. However, it offers us not only opportunities, but also dangers of losing our money. A trader who has been in any of the financial markets knows that making money in stock, commodity or forex markets is very difficult. Nevertheless, if one is persistent and spends enough time analyzing the charts and market conditions, he will eventually become successful. One of the key things that any trader must have is a reliable trading strategy that he could follow with proper discipline. One of the best strategies that I know and intend to describe in the article is a trend trading strategy.
Trend trading strategy is broadly used among fund managers and speculators as well as investors. Those that study markets know that prices of securities stay in ranges for the biggest part of a year. However, once or twice a year prices break out of the ranges and start trading. Trading in a range can be very difficult as price very often goes sideways and is not moving anywhere until some fundamental data pushes it up or down. In a range most traders lose their money. Unless you have developed a good day trading strategy I would not advise you to trade in a range. As you may see now, investors do not usually like trading ranges as they prefer to keep their positions for a long time and are not interested in daily fluctuations in price.
When a price finally breaks out of a range it usually starts going one direction with minor retracements. That is why it is much easier to trade a trend than to trade a range. Most traders make money when a trend starts. However, a newbie trader should be careful as a trend can end very fast and price usually collapse back to their breakout levels. Therefore, one has to develop a system how to protect profits and limit losses. One of the easiest way to do that is by placing your stop loss orders below most recent lows on 1 hour or 4 hour charts (if the price is moving up) or above most recent highs on 1 hour or 4 hour charts (if the price is going down).
One more thing that a trader can do when a trend starts is to build a line of positions. Let’s say the price broke up today. We automatically place a buy position and go up with a trend. If price continues going up we wait for a minor retracement and open one more long position. We continue doing this as long as the market is going up. At the same time we move our stop loss orders up just to protect existing profit or reduce possible loss. By trading a trend in this way one can double or even triple his account. The only problem is: trends do not happen very often. However, if you utilize this trading strategy you will be able to make some nice profit each year and finally become a professional investor.
About the Author
I recommend reading my article about forex trading strategies to find out how to trade other market conditions and one more article about my specific strategy which I use to trade economic news.
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