Best Momentum Trading Course

The strategy of trend following goes against the old Wall St.  Philosophy of buy low and sell high.  It takes merit of the market whether the present trend is up or down.  Traders using the trend following method begin trading after a trend is already established.  Other traders attempt to predict what the market will do, trend followers wait for the market to do it.  The size of the trading account and the volatility of the issue are the primary determining factors in how much to invest. 

Click here to see a trend following strategy that generated 48% return last year.

The systems that monitor trend following are pre programmed to exit if there is an unexpected downward turn to the trend.  The trader will wait and re-enter if the trend re-establishes itself.  The point of trend following is to follow the trend after it is established.

Price is the 1st rule of trend following.  Other indicators are not important, although they don’t seem to be entirely overlooked.  The second factor is the choice of how much to trade.  The timing is less vital than the amount of the trade.  Then there is the exit strategy.  When to get out if the trade is unprofitable or if the trade is profit-making.  Finally, you must set a stop loss for the maximum sufficient loss.

These traders use their software to test trades before investing.  The software can guage the risks against the potential benefits of the transaction.  The assorted factors relevant to the trade are programmed into the software and the trader makes his call based on the result of the test.

One difficulty with trend following is the impact that unanticipated events can have on the market.  Political upheavals, natural disasters and other events can effect the market in both negative and positive strategies.  When Hurricane Katrina cause massive damage to grease rigs and pipelines in New Orleans, the price of oil and petrol zoomed in the expectation of deficits.  Even though no severe shortages happened, stockholders and trend followers, in both the stockmarket and the commodities market, kept the price of oil raised for months after the event.   

By definition, all stock market investing is speculative.  Following trends is a specific method for taking advantage of highs and lows in the market and using them to your own advantage.  Unlike hot stocks, which involve holding stocks for extremely short periods, hours or days, trend following involves keeping stock for longer periods, though the basic principle is quite similar.  In trend following one might hold the stock for a week or a month depending on the trend. 

In the market there is no assured strategy for earning profits.  It’s a necessity to have a plan or you will certainly lose money.  Trend following should by one of several strategies you employ to maximise your gains and minimize your losses.

Learn how you can apply trend following to ETFs and generate great returns with low volatility.