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. 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 >>
  2. 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 >>
  3. 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 >>
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. Stock Analysis

    A Trader's Look at the S&P 500

    Moving averages are sending an important signal, and it's probably not what you think.
  8. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  9. Chart Advisor

    These Oil Service Stocks Are Ready For A Move Higher

    In the oil services sector, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be ...
  10. Trading Strategies

    The Top Five Stocks For Novice Swing Traders

    New to Swing Trading? Here are the top five stocks recommended for swing trading.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center