Trend trading is a form of trading that requires some strict rules. Not following those rules makes the trend riding impossible. Every trend rider has to follow those rules if they want to earn money. Those rules encompass all aspects of the deal, from the initial investment up to the trend conclusion.
Even though there are the rules that guide the traders through the whole process, some of them still make mistakes. Those mistakes may be small and simply diminish the return, while others cause the negation of the profit or in some cases the loss of the investment. The latter two rarely happen, but there are always new traders that will try to change the rule-set because they found a better way to earn the cash.
The basic rules for trend traders
The only tool the trend rider requires is the chart or several charts. The charts are the only source of information that will accurately follow the trend as well as the beginning of one. An event may or may not start a trend, and that is the chance a trend seeker will not take. Why to risk the investment when they can wait for the beginning and jump on the train that is on the move.
Once all indices (only major) go bullish then the trader will glue their eyes to the charts and wait for a breakout (the beginning of the trend).
Once the deal is on the trader should forget about it. They should pay attention to the charts as they will inform them about their next move.
A smart trend rider can earn some cash from short-term deals on the same stock they trade with. The opportunity arises once the countertrends start. They start due to news and events that are contrary to the trend. They won’t affect the ride, and with smart investments that ride the countertrends can generate a nice return.
Mistakes that some investors make
The risk of the loss exists everywhere, and the mistakes people make cause those risks to spiral. A certain portion of traders uses systems on their trade rides. Those systems might be good in the normal run, but they are both late to the exit, and they are easily shaken out of the trend. Software like that works on other markets,Online Wealth Markets in binary options, but they are almost useless in trend riding.
A false start may ruin a trader who reacts too quickly to the breakout. The false start is the failed breakout that is usually followed by the real one. The point is to recognize it as a false and wait for the right start.
A trader must leave their emotions out of trading. But that is impossible for many. That is why some people pull out of the trend too early. They might be satisfied with the return they got, or they might have been scared of the potential loss. The fear and the greed are two very different things, and yet they are the archenemies of a trend trader.Read More