Trend Trading

To follow our friend in a market, namely trend, we can consider implementing trend trading strategies. This trading or "betting with positive edge" method involves a risk management component that uses three elements: number of shares or futures held, the current market price, and current market volatility An initial risk rule determines position size at time of entry.
A trader could short shares or futures contracts (the selling of shares or contracts that have been loaned from a broker with the intent of purchasing them back for less cost in the future), or buy put options (a type of investment where the owner has the right to sell by a predetermined date for a specific price, but isn't required to do so).



While there are all sorts of technical tools for analyzing trades, the simplest way to spot a trend, or what might be the beginning of a trend, is to watch and see if each time period's trend trading indicators high keeps getting higher, indicating the market is steadily trending up in price, or if each period's low continues to get lower, indicating a downward trend in price.

In a 2005 article published in the Journal of Applied Finance titled The Profitability of Active Stock Traders” professors at the University of Oxford and the University College Dublin found that out of 1,146 brokerage accounts day trading the U.S. markets between March 8, 2000 and June 13, 2000, only 50% were profitable with an average net profit of $16,619.
Other traders will look to one of the ore common indicators, the moving average There are a lot of different flavors and types of moving averages, but the goal is all the same - to show us a ‘line-in-the-sand' as to whether price movements are ‘above-average' or ‘below-average' for a given period of time.

As you probably already know, there are tons of different indicators that you can put on your charts to ‘help' you identify a trending market and trade with it. Many traders spend countless hours and dollars on trend-following trading systems or on indicators that just end up confusing them and making the process of trend discovery a lot more difficult than it needs to be.
In a 2003 article published in the Financial Analysts Journal titled The Profitability of Day Traders”, professors at the University of Texas found that out of 334 brokerage accounts day trading the U.S. markets between February 1998 and October 1999, only 35% were profitable and only 14% generated profits in excess of than $10,000.