Following Trends As A Market Strategy
The technique of trend following goes against the old Wall St. Philosophy of buy low and sell high. It takes advantage of the market whether the present trend is up or down. Traders using the trend following method begin trading after a trend is already established. Other traders try to foretell what the market will do, trend followers wait for the market to do it. The size of the trading account and the volatility of the issue are the first determining factors in how much to invest.
Most trend followers invest in sophisticated software that can be programmed to exit if the trend changes all of a sudden. 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 are not critical, although 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's the exit strategy. When to get out if the trade is unprofitable or if the trade is profitable. Ultimately, you must set a stop loss for the maximum satisfactory loss.
Trend disciples use software to back test a trade that is under consideration. They can then evaluate the technique based on the test. The software evaluates diverse sides of the trade under consideration. The trader can observe the results and finely tune his approach.
Outside events can have an unlooked for effect on market trends. Man made and natural disasters and political disturbance can have either a positive or negative result on the market. For example, when Hurricane Katrina damaged and destroyed oil rigs and pipelines in the Gulf of Mexico, oil costs instantly climbed in response to an anticipated shortage. Although the shortage never materialized, prices remained high for many months due to speculation in both the commodities and stock exchange.
The exchange is a bet, although if you know the way to play the market, you get better odds than in Vegas. Trend following is one method which has proved successful for many investors, but it shouldn't be a trader's only strategy. By combining trend following with other proved systems you'll maximise your gains and minimize your losses. A diverse portfolio along with different strategies is the best way to beat the market.
In the stock exchange there's no assured strategy for earning profits. It's a necessity to have a plan or you will certainly lose cash. Trend following should by one of several techniques you employ to maximize your gains and minimize your losses. - 23212
Most trend followers invest in sophisticated software that can be programmed to exit if the trend changes all of a sudden. 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 are not critical, although 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's the exit strategy. When to get out if the trade is unprofitable or if the trade is profitable. Ultimately, you must set a stop loss for the maximum satisfactory loss.
Trend disciples use software to back test a trade that is under consideration. They can then evaluate the technique based on the test. The software evaluates diverse sides of the trade under consideration. The trader can observe the results and finely tune his approach.
Outside events can have an unlooked for effect on market trends. Man made and natural disasters and political disturbance can have either a positive or negative result on the market. For example, when Hurricane Katrina damaged and destroyed oil rigs and pipelines in the Gulf of Mexico, oil costs instantly climbed in response to an anticipated shortage. Although the shortage never materialized, prices remained high for many months due to speculation in both the commodities and stock exchange.
The exchange is a bet, although if you know the way to play the market, you get better odds than in Vegas. Trend following is one method which has proved successful for many investors, but it shouldn't be a trader's only strategy. By combining trend following with other proved systems you'll maximise your gains and minimize your losses. A diverse portfolio along with different strategies is the best way to beat the market.
In the stock exchange there's no assured strategy for earning profits. It's a necessity to have a plan or you will certainly lose cash. Trend following should by one of several techniques you employ to maximize your gains and minimize your losses. - 23212
posted by X - Men @ 2:11 AM
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