What is trend trading?
There are two types of trend trading: following the trend and against the trend!
But I understand what you’re asking: What’s a ride, right?
All the talk about the tide!
In practice, the vast majority are against the market!
Buy the dips, sell the dips!
The most classic contrarian operation….
I don’t want to go into the best way to trend trade, because “best” is a very personal word.
It should be said that there are many good trend trading strategies, all of which can increase a trader’s potential profit.
What I want to show you is a trend trading method that helps you identify trends and trade multiple times in the direction of the current trend.
However, to make the best use of it, we can’t trade a little profit and rush out.
Profitable trades to make it run, to take advantage of trends as much as possible.
What’s more, it takes time for the market to change in our favor.
The trick to this trend trading method is to wait for a trend pullback, and then trade with the trend with each pullback.
The steps are as follows: 1. Determine the direction of the market trend 2. Identify the pullback and know how to determine the occurrence of a pullback 3.
4. Know How to get out Here’s an example: Let’s take a step-by-step look at how to do the four steps above using this chart.
Step 1: Determine the direction of market trends This step is relatively simple, and many traders have their own methods for determining trends.
It is common to find the intersection of two moving averages, which gives us a trend direction signal.
It is important which moving average you use. Some combinations to consider are: 9-day SMA & 18-day SMA 7-day SMA & 14-day SMA 25-day SMA & 50-day SMA The smaller the number, the faster the move;
The larger the number, the slower the fluctuation.
If the 9-day and 18-day averages cross and move lower, it signals a downtrend.
The reverse is an upward trend.
Step 2: Recognize a pullback and know how to determine when one is occurring. A pullback is a situation where prices move away from two moving averages and then occasionally move closer.
If the price approaches, the two moving averages may act as support/resistance, and then the price will bounce back and gradually move away.
There’s another way to define a pullback: a small, temporary move that runs counter to the main trend.
#2 How do you identify callbacks?
1. Two moving averages cross and the price moves completely away from them 2. When a pullback occurs, the price can move closer and closer to the two moving averages and finally meet. Remember, two moving averages are not really support/resistance, they are just a reference point for us to better understand the price movement.
Step 3: Buy/Sell Signals to Watch This step is also simple: Look for price behavior signals.
1. If the trend is down and the price retracement is close to the moving average and converges, then look for the bearish inversion candle chart pattern;
2. If the trend is up and the price correction is close to the moving average, look for a bullish inversion candle chart pattern.
Step 4: Know How to get out This step is the most important part of the trend trading method.
After all, you have multiple moves in major trend directions, maybe three or even 10 trades at the same time.
So how do you manage the stop-loss Settings on each trade?
I use the example of shorting in a downtrend: 1. The first trade should occur on the first pullback after two moving averages cross.
A stop should be placed above a nearby lower swing high, no more than 30 points away.
If there are no lower highs nearby, place a stop 30 points above the bearish inversion candle pattern.
2. The second trade occurs during the second pullback, and you can set your stop loss in the same way as above.
The important thing is to move the stop loss on the first trade to the stop loss on the second trade.
So the second trade doesn’t increase your risk.
3. The third trade occurred on the third pullback.
Stop losses in the same way as above.
Move the stop loss on the first two trades to the stop loss on the third trade.
The first two trades are profitable, and moving stops help you lock in profits.
4. Repeat until the loss is stopped.
The above is an example of a downward trend.
In the uptrend, the operation can be reversed.
Here’s an operating chart of the uptrend: There’s really no other trick, just make the most of the trend.
Each trade adjusts the stop loss of all previous trades, so that no matter how many trades you make, the risk is always on the last trade.
This trend trading approach works best with 1 – and 4-hour charts.
Also remember, don’t rush to analyze after you trade, and learn to give the market time to eventually change in your favor.
