Trend Trading Systems

I’m not sure if what I’m about to say is entirely true, but from what I have read, Trend Trading is one of the most popular and long lived trading system around.

I really like Trend Trading and use it as the basis of my trading system. It has always seemed to make sense to me - A kind of ‘if it ain’t broke, don’t try to fix it’ approach to calculating the future price of something.

However, I also understand that it is not the only trading system that words, but I have success with and so do many others. I am also a Technical Trader, and Trend Trading probably lends itself more to the technically inclined.

What follows is a brief introduction to the world of Trading the Trend. Let’s take a look at what it is, how it works and who uses it.

What is Trend Trading?

Basically, Trend Trading is buying or selling financial instruments depending upon the recent price action going in a particular direction and determining the likelihood of it continuing in that direction.

To find out if a stock is Trending, take a look at its chart. It its price action forms an upward, downward or sideways line, then the chances are that it has formed a trend.

The next thing to do is decide whether you want to buy or sell the stock and then jump onto the trend and hopefully make a nice profit.

Of course, it the stock is trending sideways, then there is no money to be made from that trend.

How does Trend Trading work?

Trend Trading works because a number of people will believe that a financial instrument is incorrectly valued over a certain period of time.

Once the trend begins, more traders and investors will jump onto the trade and keep the price going up.

Often, people who invested at the beginning of the trend will increase their positions as the trend shows signs of becoming established.

Statistically, a stock that is trending in a certain direction has about an 80% chance of continuing in that direction. That’s pretty good odds, and is a reason that a trending stock will continue to trend as investors take those odds.

Who does Trend Trading?

There are many great examples of people who have traded trends to make their fortunes. If you are interested in Trend Trading, then it would pay to read about some of them.

Jesse Livermore did a fair bit of trend trading to make (and sometimes lose) a few dollars. His accounts of Trend Trading can be found in the pages of Reminiscences of a Stock Operator.

Ed Seykota is one man who made his fortune trading the trend. You can read about him and a little of how he did it in Jack Schwagers Market Wizards book.

Nicolas Darvas provides an excellent account of how he used Trend Trading to make 2 Million Dollars In The Stock Market.

Darryl Guppy has written a good book called Trend Trading which is worth a read. It is pretty much a Trend Trading 101 on the topic and I would recommend it.

Finally, please remember that this is only an introductory guide to Trend Trading. If you feel that you would like to try and make some money using this trading system, then please remember to do your research!

Related Articles:
Profitable Trend Forex System
Forex Trading Videos
Fibonacci Retracement Lines
Swing Trading
Surefire Trading