. Learn How To Beat The Market Using Trend Trading

PART 3 OF 5

Step 2: Trend Trading

• You must trade in the direction of the Trend. This really is the one primary tenet of Trend Trading. This Is The Fundamental Law Of Trend Trading. Hold it sacred! Do not breach this rule.
  In technical analysis, the trend is your friend. Up to 90% of your technical analysis will be really determined by the trend. Accordingly stay with the trend until the trend reverses.
  
  There are ways discussed later to spot reverses. Not each pull back is a reversal. Identifying as well as staying with the trend is the most important part of your plan. Things in motion usually stay in motion and this is normally right for the stock market.
  In other words, don't short a rising market lest you receive a reversal indication and don't buy a down market unless you get a reversal signal.
  It is true that you will miss selling precisely at the top or buying precisely at the bottom. However, when you notice the formation of a trend you'll get in early enough to generate loads of profits.
  At the same time, you will avert the pain of attempting to foresee the tops or bottoms, missing them which you will nearly always do, and suffering terrible repercussion as a result.
  Tops and bottoms are only identified once they have been made. Trying to predict tops and bottoms is mostly a harebrained and hazardous pastime and you may get your head ripped off.
  
• You want to trade in stocks which you even have done some fundamental analysis on to know what the company does and what it's fiscal wellbeing is.
  There are usually various superficial corporations with meager fundamentals that are showing good chart patterns. Be cautious of these because they are going to finally submit to the truth of the state of their affairs after their lousy fundamentals have been exposed.
  Once that happens, they head back to earth with a wildness which will hurt incredibly acutely unless you were able to distinguish the reversal and got in on that development by buying Puts.
  Thus, being conversant of the fundamentals of a business is essential for our use of technical analysis. Although pure technical analysis will not concern itself with fundamentals, we want to afford every benefit to ourselves and that is an additional cushion of benefit.
  Accordingly, again, don't buy a stock until you know very well what the company does.
  
• In technical trend trading, you want to trade in active markets where the daily volume surpasses 500, 000 shares average daily traded for the actual stock that you have an interest in.
  Additionally importantly, you want to trade where the action is and not in some sleeping stock that is going nowhere although it might have the best fundamentals, the highest volume plus be the greatest stock in the globe.
  If there isn't any price propulsion, bypass it. We wish movement, preferably upward movement.
  A good place to start to look for stocks with price momentum is to check out the stocks which have been making yearly highs. There is a daily listing of those on almost any stock reporting site.
  Stocks making new highs is definitely an automatic signal that they are on an up trend.
  Two things regularly take place here that are crucial in Trend Trading and at the heart of your analysis and execution - A breakout or a pullback.
  The pullback may be just a consolidation to pick up again on it's upward trend or possibly a reversal. Identifying a reversal shall be covered later on.
  A breakout or a reversal is usually confirmed and powered by higher than average volume. This really is the sweet spot of Trend Trading.
  This move may be rapid and wild. That is a pleasant place to be and it makes a lot of money swiftly for traders and investors alike.
  

• Trade where all of the momentum is going. Limit your loses and let your winners run.
• By instinct, we want to buy when things are cheap and getting cheaper. Consequently, there's a normal temptation to buy a stock when it's declining because it is getting cheaper.
  However, the allure of buying just because it's getting less costly has hurt many traders and investors.
  Whenever a stock is declining and you buy more is usually dumb unless it is nearing solid resistance and you intend to take the chance at preempting a reversal.
  Don't do it if it is in free fall. Falling stocks frequently stay falling and increasing stocks generally stay rising until they signal a reversal.
  In actual fact, in case you are just beginning, do not even seek to preempt a reversal. Get winning stocks! Get out once they stop winning!
  

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