Six best Trend Trading Strategies
The goal of trend trading techniques also termed strategic trend initiatives, is to keep the current trend going. And there is a definite trend, which is a must for these trading strategies. To put it another way, if you observe the price rising, you go long. You go short if the value is bearish. That’s all there is to it.
Even though trend reversals offer several trading opportunities, leading indicator
traders must exercise extreme caution when dealing with them. The trend remains unchanged for as long as possible, providing excellent trading chances with an optimistic outcome. However, we know that currency pairs do not react in this manner, so we must rely on chart patterns to keep reversals at bay.
The trading method is based on the Moving Average Crossover.
Because it is straightforward and offers objective signals, this method is appropriate for novices. It also employs the most widely used technical indicator, Simple Moving (MA). 3 Simple Moving Averages will be used (SMAs). Remember that MAs are trailing indicators, meaning they reflect past market movements rather than mysteriously anticipating future price fluctuations.
Naturally, this is a simplified version of a rolling average trend trading strategy
. Still, the central premise is that moving intermediate crossings provide directional information as well as an objective way to visualize momentum. Remember to always practice on a sample account first, always use stop loss orders, and follow conservative risk management methods.
Bollinger Bands Trending Technique
Bollinger bands assume that prices will bounce again like an elastic band. Essentially, they display the lowest and highest points at which the equipment cost has fluctuated. They can be utilized in markets that are in uptrends, downtrends, or even ranging. Bollinger Bands are particularly useful for measuring volatility.
If the bands are a long way from the current price, the market is likely to be quite volatile. It means the contrary if they are very near to the current pricing. Many traders, especially beginners, should be advised to avoid either of these two; by purchasing when the price gets too low and trading when the price reaches the higher band, you can employ Bollinger bands as an aspect of your pattern trading strategy.
Moving Averages Convergence Divergence Trending Method
Moving averages can be seen on most charts and are a fantastic way to see the overall trend behind an instrument. There are various moving averages to pick from, but many trend traders like to utilize a slow-moving standard. They can help firms avoid mistaking transient price movements for trends by focusing on the accurate price and momentum of a trend. Buying when the current cost dips underneath the moving average and selling when the actual cost meets or peaks above the moving average are two ways to employ moving averages in your tendency trading strategy. It’s vital to remember that moving averages can’t predict whether or not a trend will stop. They can indeed show you what has happened in the past. As a result, you can’t rely entirely on them.
The technique of Ascending and Descending Triangles
Aside from using technical indicators, chart patterns can be used in some effective trend trading strategies techniques. Though not symmetrical, Triangles are the most straightforward and strong trend continuation patterns for me; after a period of tension between bulls and bears, the ascending and descending triangles signal that the current trend would continue in the same direction. For simplicity, we’ll examine the ascending triangle, and you use the same techniques for the descending triangle but presumably with inverted circumstances.
When the price creates a flat upper block and an ascending downward trendline made up of higher highs, the ascending triangle appears. A falling upper line and a smooth lower edge form a descending triangle. When you see an ascending triangle forming, the uptrend is encountering severe bearish resistance, which is mirrored by the flat resistance line. Impatient traders will frequently enter the market too quickly, but waiting for a proven break may provide a better reliable trading strategy. You might put your stop loss at the most current swing low and aim for a take profit equal to the distance established by the triangle’s first leg.
Channel patterns are helpful in both uptrends and downtrends and range markets. They are created using the channel pattern tool in your plotting software and are used to identify market price highs and lows.
While a trend is in motion, you can employ them in your trend trading style by selling when they reach the highest points and purchasing when they come lower. In the same way as the previously described Bollinger bands.
However, keep in mind that it might be difficult to tell when a trend is ending. You’ll need to rebuild your route pattern if this happens. To avoid this from happening, keep an eye out for burst-out moments. In highly volatile markets, they can also be hard to implement.
Double Bottoms and Double Tops
Some other illustration of a trending technique that goes both ways signifies the conclusion of one trend and the beginning of another. An uptrend has ended when a double top develops, and a downturn begins. Two price peaks distinguish it. The second peak is usually smaller than the first.
When you see a double top, it’s an indication that you must sell because the value will only go lower. In the case of double bottoms, the opposite is true. They are distinguished by two price drops, the second of which is usually marginally more extraordinary than the first. When you witness a double bottom, view it as a hint to buy because the price is likely to rise.
It’s also worth mentioning a phenomenon known as triple peaks and bottoms. They’re the same as the last pair, but with 3 tops or bottoms instead of two.