Trend Trading

AAA

DEFINITION of 'Trend Trading'

A trading strategy that attempts to capture gains through the analysis of an asset's momentum in a particular direction. The trend trader enters into a long position when a stock is trending upward (successively higher highs). Conversely, a short position is taken when the stock is in a down trend (successively lower highs).

INVESTOPEDIA EXPLAINS 'Trend Trading'

This strategy assumes that the present direction of the stock will continue into the future. It can be used by short-, intermediate- or long-term traders. Regardless of their chosen time frame, traders will remain in their position until they believe the trend has reversed - but reversal may occur at different times for each time frame.

RELATED TERMS
  1. Countertrend Trading

    A type of swing-trading strategy that assumes a current trading ...
  2. Trend

    The general direction of a market or of the price of an asset. ...
  3. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  4. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  5. Reversal

    A change in the direction of a price trend. On a price chart, ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
RELATED FAQS
  1. How should a risk-averse investor build a retirement portfolio?

    One trading strategy to use when a stock's price fails to reach a higher high would be to short the stock while setting a ... Read Full Answer >>
  2. What is a common strategy traders implement when using the Price Rate Of Change (ROC)?

    A common strategy traders implement using the price rate of change (ROC) indicator is using the indicator's slope to identify ... Read Full Answer >>
  3. How do I build a profitable strategy when spotting a Golden Cross pattern?

    The golden cross pattern offers trading opportunities in both trend trading and countertrend trading. The golden cross pattern ... Read Full Answer >>
  4. How do I implement a Forex Signal System into a forex trading strategy?

    There are a number of ways to implement a forex signal system into an overall forex trading strategy. Forex signal systems ... Read Full Answer >>
  5. How can I spot trading opportunities looking at year-to-date (YTD) performance?

    Trading opportunities on the long side can be spotted by looking at stocks with the worst year-to-date (YTD) performance, ... Read Full Answer >>
  6. How does Net Operating Profit After Tax give a clearer view of the operating efficiency ...

    Net operating profit after tax (NOPAT) gives a clearer view of the operating efficiency of a company. While NOPAT is a measure ... Read Full Answer >>
Related Articles
  1. Trading Systems & Software

    Four-Week Rule Boosts Winning Trades

    Acquaint yourself with an indicator that played a role in the early development of technical analysis.
  2. Forex Education

    Forex: Finding Your Trading Style

    Determine your own trading style, and the versatile currency market will accommodate it.
  3. Active Trading Fundamentals

    Identifying Market Trends

    The success or failure of your long- and short-term investing depends on recognizing the direction of the market.
  4. Forex Education

    Forex: The Moving Average MACD Combo

    Learn a strategy with clear entry and exit levels that will get you into a trend at the right time.
  5. Forex Education

    Forex: Should You Be Trading Trend Or Range?

    In FX, it's not the price environment that decides this for you. Learn the differences to see which you prefer.
  6. Forex Education

    Pivot Strategies: A Handy Tool For Forex Traders

    Make more educated trading decisions by identifying major turning points.
  7. Chart Advisor

    How Investors are Profiting from Cyber Crime Fear

    An ETF that has seen significant gains this year in the growing field of cyber security, and the threat and fear of cyber attacks and cyber crime.
  8. Chart Advisor

    Buy These Stocks on The Pullback

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  9. Technical Indicators

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  10. Chart Advisor

    3 Ways To Trade Oil's Move Lower

    The spot price of oil is facing major resistance. We'll take a look at a few products that you can see to profit from the move.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!