In this paper we will discuss about trend trading system. Trend trading means trading according to the market trends. Trend trading system enables the traders to determine the trend and set their strategies accordingly.
Trend trading refers to the practice of buying and selling any financial instruments on the basis of current price trend, ups and downs. A trend trading system helps the investors to set their trading strategies according to the price movements.
If a trader wants to find out that whether or not a particular stock is trending then, he or she has to examine the price chart of that very stock. If the price action follows a downward or upward or sideways line then, there is a chance of a price trend. Then the trader may analyze if it is profitable to go for it or not.
If the stock price follows a side wise line then, there is absolutely no chance of profit.
However, trend trading exists because numerous traders think, or better to say strongly think, that a financial instrument is not valued correctly within a certain time frame. After the commencement of a trend, most of the traders go for it in no time and thereby, the price goes up.
Often, it is profitable to invest at the early stage of a trend as the trend may establish for a long time. Statistically, almost 80% of the stocks do continue along their initial trend direction.
Simple Trend Trading System:
It is basically a “trend following” system. Simple trend trading system normally uses an indicator to understand the trends. It emerges as a good day trading tool but, the long term investors and intermediate traders also can use it.