Trend Trading

A A A

DEFINITION

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

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 trend will reverse ...
  2. Technical Analysis

    A method of evaluating securities by analyzing statistics generated by market ...
  3. Trend

    The general direction of a market or of the price of an asset. Trends can vary ...
  4. Reversal

    A change in the direction of a price trend. On a price chart, reversals undergo ...
  5. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with the expectation ...
  6. Momentum

    The rate of acceleration of a security's price or volume. The idea of momentum ...
  7. Asset

    1. A resource with economic value that an individual, corporation or country ...
  8. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, with the ...
  9. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to predict the reliability ...
  10. Mass Index

    A form of technical analysis that looks at the range between high and low stock ...
Related Articles
  1. Four-Week Rule Boosts Winning Trades
    Trading Systems & Software

    Four-Week Rule Boosts Winning Trades

  2. Forex: Finding Your Trading Style
    Forex Education

    Forex: Finding Your Trading Style

  3. Identifying Market Trends
    Active Trading Fundamentals

    Identifying Market Trends

  4. Forex: The Moving Average MACD Combo
    Forex Education

    Forex: The Moving Average MACD Combo

  5. Forex: Should You Be Trading Trend Or ...
    Forex Education

    Forex: Should You Be Trading Trend Or ...

  6. Pivot Strategies: A Handy Tool For Forex ...
    Forex Education

    Pivot Strategies: A Handy Tool For Forex ...

  7. Is Now the Time To Buy The Big U.S. ...
    Chart Advisor

    Is Now the Time To Buy The Big U.S. ...

  8. Introduction To Swing Trading
    Trading Strategies

    Introduction To Swing Trading

  9. Use The Percentage Price Oscillator: ...
    Investing

    Use The Percentage Price Oscillator: ...

  10. Add Some Sin To Your Portfolio With ...
    Chart Advisor

    Add Some Sin To Your Portfolio With ...

comments powered by Disqus
Hot Definitions
  1. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center