Heed the Trend when Trading

Two types of trading markets to take note of are: trending and sideways markets. In certain cases, a trade may endure both markets, but it is when the trade is entered and in what type of market that determines its level of risk. Furthermore, if you are day trading or entering a long-term position, it is imperative to know the current market for determining risk too. An uptrend is when stock prices indicate higher highs and higher lows. It is very common in trading today. Always be attentive when one occurs. Our current stock market this year is a good example.

Without any symptoms of a reversal, a trend is likely developing. Watch and see if the market breathes or not. Are there any corrections? If a short-term trend isn’t obvious to you, an exponential moving average and a longer-term simple moving average can help you gauge it. Bollinger bands are another popular option.

When governments persuade a market’s direction natural ebb and flow is inhibited. Fiscal and monetary policy are big influencers. And altering interest rates affects our countries growth. The Federal Reserve will manipulate markets like a puppeteer will his puppet—propping up a market as they wish.

There is a saying, “a trend is your friend.” I don’t agree. I consider it more of a “frienemy.” It can give lucrative profits or bankrupt you. In my opinion, day traders don’t sit and wait for the trend to gain them profits. They actively trade. Money can still be made countering the trend. Going with it is usually for a longer-term investment.

Identifying whether stock prices are trending or not occurs subsequent to a trade entry quite often. Using stops in a trend environment is essential. I am not a trend trader. Riding that wave is thrilling, but I don’t chase markets. Fading and scalping all day is my specialty. Once a trend pattern is intact be very cautious. There is always the possibility of getting whipsawed!