Is Trend Following The Right Strategy for You?
The strategy of trend following goes against the old Wall St. Philosophy of buy low and sell high. It takes merit of the market whether the present trend is up or down. Traders using the trend following method begin trading after a trend is established. Other traders try to foretell what the market will do, trend followers wait for the market to do it. The dimensions of the trading account and the volatility of the issue are the first determining factors in how much to invest.
Most trend disciples invest in sophisticated software that can be programmed to exit if the trend changes suddenly. Then the traders keep waiting and see if the trend reasserts itself before reinvesting. This is about following the already established pattern of certain stocks.
Price is the 1st rule of trend following. Other indicators aren't important, though they don't seem to be entirely overlooked. The second factor is the choice of how much to trade. The timing is less important than the quantity of the trade. Then there is the exit strategy. When to get out if the trade is unprofitable or if the trade is profit-making. Ultimately, you must set a stop loss for the maximum acceptable loss.
Before entering a trade, most trend disciples will test it on their software so they can appraise the probable risks and gains. The software is programmed with various factors in relation to the particular trade. The trader then decides if he should make the trade under consideration.
Outside events can have an unlooked for effect on market trends. Man made and natural disasters and political unrest can have either a positive or negative effect on the market. For instance, when Hurricane Katrina damaged and annihilated oil rigs and pipelines in the Gulf of Mexico, oil prices immediately climbed replying to an anticipated shortage. Although the deficit never materialized, prices remained high for many months due to speculation in both the commodities and stock market.
Unarguably, all stock market investing is speculative. Following trends is a particular method for utilising highs and lows in the market and using them to your own advantage. Unlike hot stocks, which involve holding stocks for extraordinarily brief periods, hours or days, trend following involves keeping stock for longer periods, although the basic principle is reasonably similar. In trend following one might hold the stock for a week or a month depending on the trend.
In the stock market there's no assured strategy for making profits. It is necessary to have a plan or you will certainly lose money. Trend following should by one of several methods you employ to maximise your gains and minimize your losses. - 23229
Most trend disciples invest in sophisticated software that can be programmed to exit if the trend changes suddenly. Then the traders keep waiting and see if the trend reasserts itself before reinvesting. This is about following the already established pattern of certain stocks.
Price is the 1st rule of trend following. Other indicators aren't important, though they don't seem to be entirely overlooked. The second factor is the choice of how much to trade. The timing is less important than the quantity of the trade. Then there is the exit strategy. When to get out if the trade is unprofitable or if the trade is profit-making. Ultimately, you must set a stop loss for the maximum acceptable loss.
Before entering a trade, most trend disciples will test it on their software so they can appraise the probable risks and gains. The software is programmed with various factors in relation to the particular trade. The trader then decides if he should make the trade under consideration.
Outside events can have an unlooked for effect on market trends. Man made and natural disasters and political unrest can have either a positive or negative effect on the market. For instance, when Hurricane Katrina damaged and annihilated oil rigs and pipelines in the Gulf of Mexico, oil prices immediately climbed replying to an anticipated shortage. Although the deficit never materialized, prices remained high for many months due to speculation in both the commodities and stock market.
Unarguably, all stock market investing is speculative. Following trends is a particular method for utilising highs and lows in the market and using them to your own advantage. Unlike hot stocks, which involve holding stocks for extraordinarily brief periods, hours or days, trend following involves keeping stock for longer periods, although the basic principle is reasonably similar. In trend following one might hold the stock for a week or a month depending on the trend.
In the stock market there's no assured strategy for making profits. It is necessary to have a plan or you will certainly lose money. Trend following should by one of several methods you employ to maximise your gains and minimize your losses. - 23229
posted by X - Men @ 6:05 AM
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