What is Trend Trading?

Ever heard of the term "Trend Trading"? If you are an active trader looking to buy and catch the direction of a trend, this strategy might work for you.

Trend Trading is when you make buying decision base off of a trend. Specifically buying a stock that is trending up over a period of time, and taking profit when the trend reverses.

If you are looking for a systematic way to invest, utilize a few different trade signals, set rules and risk controls are important when using this trading strategy.

How to Identify a Trend

When a stock is trending upward, you will see "higher lows" and "higher highs" as discrepted below.

uptrend higher high higher low

The same thing applies in a downtrend, you'll see lower highs and lower lows.

downtrend lower lows lower highs

How to Start Trend Trading

Look for a stock that is trending in a direction and buy on the dips, risking the previous pivot point. For example, if you are looking to buy on an uptrend you will look to buy on the higher low and stay in the trend until the "higher low" becomes a "lower high"

uptrend reversal stock day trading

 

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