Trend Is Your Friend - Importance of Trend Trading
There are many tools that traders employ when trading the fast-paced world of financial markets. One fundamental strategy often used by traders is identifying the overall trend of the market. By understanding the overall trend of any given market, whether cryptocurrencies, forex or stocks is fundamental to any day traders’ success. This article will deep dive into the concept of trading trends and their significance.
Trend Trading?
Trend Trading refers to the general direction in which the price of an asset is moving over a period of time. Trends can be categorised into three categories: bullish (upward), bearish (downward), or sideways (horizontal) that represent the direction in which the asset’s price moves. Market Spotter’s indicator Turbo Trend and the Cloud Catcher is at the heart of trend trading and provide valuable insights into potential future price movements.
Significance of Trading Trends
Trading trends are paramount to traders for many reasons. The first is profit potential, trends allow traders to make profits by entering a long position in an uptrend, or a short position in a downtrend. By trading with the trend, traders can take advantage of price movements that conform to the direction of their position.
The second point addresses the importance of identifying the prevailing trend. By understanding the prevailing trend, traders can make informed decisions when to enter or exit their positions. The Market Spotter Turbo Trend indicator also provides users with entry opportunities and take profit signals. These built in functions are what makes Market Spotter Indicators so unique.
Thirdly, trends provide the perfect opportunity to measure market sentiment. For example, a strong uptrend can indicate optimism and/or bullish sentiment around a certain asset. On the contrary, an extensive downtrend may indicate bearish sentiment. Day traders may also find that their technical analysis may also correspond with the market trend, especially trendlines and charting patterns.
Identifying Trends
There are many methods to identify a trend of any given market. Moving Averages are known for their ability to smooth price action, therefore, identifying the overall trend of an asset. Other indicators like the Moving Average Convergence Divergence (MACD) is also sufficient to identify trends. In addition to the Turbo Trend and Cloud Catcher, Market Spotter has created an indicator called the MACD Pulse and RSI Rocket, which are also effective in identifying trends.
Trading the prevailing trend is the key to the success of many day traders and their trading strategies. Identifying and capitalising these trends can lead to profitable trading opportunities and assist with risk mitigation. Though, traders must be aware of fundamental events that may add to the driving factor of the market and therefore may influence the given trend. Market Spotter has provided a wide variety of indicators that assist traders when identifying trends, with exit and entry opportunities to assist in mitigating risk.