We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What are the Best Tips for Trend Following Trading?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 1,779
Share

Trend following trading is an investment strategy that requires the investor to accurately project the changes in trading activity and price associated with a specific security, then participate in that trend as a means of generating a return on the investment. This approach can be used both in terms of riding a security while it is climbing and selling it just before the price levels off, or buying securities when the price is at its lowest point but just before that price is anticipated to increase dramatically. In order to manage this process, there are a few basic tips and strategies that any investor must use in order to benefit from trend following trading.

Part of the process of effective trend following trading requires considering three essential points as they relate to the market activity. Price is a major concern, since the idea is to accurately read market indicators to identify if that price is likely to increase, decrease, or remain stagnant, based on what is happening in the marketplace right now. The investor must also be aware of the amount of money he or she can afford to devote to the investment for an undetermined amount of time, since the idea is to ride the trend for as long as possible. Considering the volatility of the investment is also crucial, since assuming greater risk does mean an enhanced opportunity to earn additional profits.

When employing a trend following trading approach, the investor must ask a few key questions that help determine whether or not to actually make the investment. These include determining how and when to jump into the market and ride the trend, how much of a commitment in terms of resources would be practical at the present time, and when to exit a given trade before the investment becomes unprofitable. Depending on the nature of the trend and the movement of the assets in question, the ride may last for a few days or go on for a number of weeks. Developing an informed idea of what to do and when to do it will increase the chances of making a profit, rather than becoming a victim of the trend.

As with most investment strategies, trend following trading requires that the investor have a firm grasp of what is happening in the marketplace now, as well as how that current set of circumstances is affecting the value of a given asset. Only by beginning with events as they stand today can the investor hope to evaluate different indicators and formulate a strategy that results in earning a return. If the investor does not evaluate the trend properly, or fails to jump in or exit at the right time, then the trend following trading approach will fail, and the investor will emerge from the experience with fewer resources than before.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-are-the-best-tips-for-trend-following-trading.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.