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. Momentum

    The rate of acceleration of a security's price or volume. The ...
  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 are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  6. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... 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. Active Trading Fundamentals

    Five Biggest Obstacles Facing First-Year Traders

    Address these five obstacles and you'll make significant progress as a first-year trader.
  8. Options & Futures

    How To Hedge Put Options Using Binary Options

    Want to hedge your plain vanilla long put option position with binary call options? We show you how.
  9. Options & Futures

    How To Hedge Stock Positions Using Binary Options

    Here’s a step-by-step method to hedge your long (and short) positions in stocks, using binary options.
  10. Trading Strategies

    Microsoft's Game of Catch-Up With The Dow

    Microsoft (MSFT) underperformed the Dow Jones Industrial Average during the 2002 to 2007 bull market, but it has played catch-up in recent years.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
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!