Trading Following Trend
Trading following the trend (trend following) in the long term can be very profitable for traders who know how to and are able to manage their positions and emotions well. Trading following the trend in the long term can be very profitable for traders who already know how to and are able to manage positions and emotions well. Here are 5 surefire tips for trading following the trend, namely:
Believe in what you see, not what you hear or read
Believe that prices and price patterns are accurate reflections of the fundamentals underlying movement in the market. According to professional traders also say that a price trend will not last long without the underlying fundamentals. However, with so much information circulating on the internet today, it is easy to suspect that there is a logical explanation for every slight shift in the market.
When trading following the trend, you should not take it too seriously to analyze the analysis of intraday price fluctuations related to short-term news releases. On the other hand, rest assured that at the end of the day or at the end of the week (depending on your trading timeframe), price movements will match the current trend.
Not Exaggerating Market Interaction
In financial markets, it is known as the correlation of price movements between several assets. Example: between the price of oil and the Canadian dollar or the price of gold and the US dollar. It should be understood that although there is a relationship between these assets, there are times when they move out of sync.
If the trader is going to trade following the trend (trend following), then don’t try to guess the movement of the trend based on past correlations. Correlation is not absolute.
Learn To Set It and Forget It
In this case the trader needs to learn to forget the trading positions that the trader has opened. When a trader opens a position, set a stop loss level and take profit according to the risk/reward. Then close the platform and try to forget the trading position.
No need to look for top or bottom
Many trend-following traders want to be able to identify the Top (top price) and Bottom (lowest price level) assuming the trading risk will be slightly less. However, professional traders who trade following the trend only participate in the top third of a price movement, because that is the place where the rewards can be obtained in the greatest amount and in the fastest time. The majority of professional traders rely on a momentum gauge to determine when to trade.