If you're like me, you've heard about trend trading, but you still aren't sure what that means. Well, to understand trend trading, you first have to understand what people mean when they talk about stock trends. In simple terms, a trend is the direction the stock price is traveling over time. If a stock is trending up, the stock price is rising. And conversely, if a stock is trending down, the price is falling. There are two kinds of trends: short-term and long-term.
That said, trends are pretty unpredictable. So you should be wary of the vast number of stock trading systems that promise to predict market trends using complicated indictors. Many of these systems promise to accurately predict what will happen in the market and when. Over time, these indicators will fail, because the only constant in the stock market is change.
The trend trading method of investing helps investors manage and minimize the risks inherent in the market. The method looked at three factors: the stock's current market price, the current volatility of market, and the amount of money and equity the investor has available.
By assessing the market risks, an investor can make better decisions when it comes to buying new stocks. Generally, the investor will want to make a return of 50% or better on a stock purchase. It's important to include in the risk assessment an evaluation of the investor's equity. If you invest too much money, you risk losing too much too fast. If you invest too little, you limit your return on your investment.
The trend trading method helps the investor to buy low and sell high. It does this by setting some general rules regarding when to buy a certain stock, how much money to risk on that stock, and the best time to sell (whether the stock is doing great, or if it's tanking).
Price, though, is always the primary concern. The system is necessarily based on the unpredictability of the market and the fact that the only thing that can without fail tell you what's happening to the price of the stock is the current price itself.
To follow the trends, look for stock trading newsletters dedicated to trend trading. These newsletters are a great way for you to learn more about the method and its practical applications. But watch out for get-rich-quick scams and schemes offering to sell you information about hot stocks. Also, be aware that even the most successful trend traders can stumble along the way.
Last and most important of the basics of trend trading stocks. don't take risks you don't understand. Once the money is gone, it's gone. Don't assume that you can simply earn it back, because you might never be able to do so.
About the Author:
To find out how more about day trading and trading courses please visit my site. Good Trading!
No comments:
Post a Comment