Trend Trading

What is 'Trend Trading'

Trend trading is 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).

BREAKING DOWN '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.

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RELATED FAQS
  1. How should a risk-averse investor build a retirement portfolio?

    Learn about a strategy to take advantage of a higher high failure on a chart, as well as the basics of trend trading and ... Read Answer >>
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  3. Why is divergence between indicators important for traders?

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