Following Trends As A Market Strategy

Trend following is a stock exchange strategy that takes benefit of both the swings and roundabouts of the market

. It's a technique that employs risk management to minimize possible losses. Traders who employ trend following enter the market after a trend has been revealed, they do not attempt to foretell trends. They work out how much to speculate in a particular issue based totally on the size of the trading account and the stability of the issue.

The systems that monitor trend following are pre programmed to exit if there is an unexpected downward turn to the trend. The trader will wait and re-enter if the trend re-establishes itself. The point of trend following is to follow the trend after it is established.

For a trend follower, its all about price. Although other factors may be considered, price is all important. The amount of the investment is determined primarily by the cost of the issue. The timing isn't as critical as the price . Before commencing a trade, the trend supporter will have planned his exit technique. The timing for getting out whether the trade is a winner or a loser is more significant than the the timing for the buy. The software can be set at a destined stop loss point to avoid unsatisfactory losses.

Trend followers use software to back test a trade that's under consideration. They can then guage the strategy based primarily on the test. The software evaluates various aspects of the trade under consideration. The trader can study the results and tune up his approach.

One problem with trend following is the impact that unlooked for events can have on the market. Political upheavals, natural disasters and other events can effect the market in both negative and positive strategies. When Hurricane Katrina cause large damage to grease rigs and pipelines in New Orleans, the price of oil and gas zoomed in the expectation of deficits. Although no severe deficits took place, stockholders and trend followers, in both the exchange and the commodities market, kept the price of oil raised for months after the event.

The exchange is a bet, although if you know the way to play the market, you get far better chances than in Vegas. Trend following is one strategy that has proved successful for many investors, but it shouldn't be a trader's only technique. By combining trend following with other proven systems you'll maximise your gains and minimize your losses. A various portfolio together with different techniques is the only way to beat the market.

There is no guarantee that you are going to make cash using trend following or any other market strategy. However to enter into market investments without a plan is almost a warranty that you'll lose money. The best way to make cash in the stock market is to employ several different strategies at one. You may chose to use trend following together with hot stocks and buy low sell high strategies. Spend some time identifying which technique works best for you and then move the bulk of your investments to that method. Many people have been quite successful using the trend following method. The software you'll need to correctly employ this strategy is available online. Don't attempt to engage in trend following without the right software.

by: Danny Denelo

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