Trend trading is easy, as long as you are able to master the entry phase and execute your stop loss plan. Sadly, timing the entry is everything but easy. Having a stop and adhering to it should be no problem, but for so many it is one nonetheless. Not being able to execute a stop is often caused by not having a real entry system.
The best cure for traders who are confused when to pull the buying trigger or have problems with applying their stop technique is automated trading. If you have a trading system with precise trading signals, there is no confusion about the entry and no doubt about the stops.
If the system works at all, you will soon gain confidence. Over time you will look at the inevitable losses and missed entry chances more relaxed and think of the whole thing as statistical trading. Trading is always statistical. We all know that, but our ego is just not ready to accept it.
Automated trading can solve both problems of trend trading, finding the right entry spot and executing the stop. If there is some trading robot or automaton that is able to trade in a market with no real long trend and without making losses, it should do much better in a trending environment.
So, autotrading seems to be interesting and that’s why trading evolution formed the modern computerized trader. Instead of torturing his poor trading head with subordinated entry questions, the softworker can concentrate on the bigger picture.
However, it is not clear if this trading style is for you. Many people love the adrenaline shock of day trading breaking news and seeing deep red numbers on their account balance shortly thereafter. But beach traders are different. They like to see black numbers visualized into the white sand of their natural desktop, while the magic of trends silently goes to work for them.
Trading is reduced for them to finding the right trend. That is a totally different task than hunting through intraday chart formations or scanning trading news in realtime. The fine thing here is that you will have time to learn selecting trends, while still being able to start your new trading endeavor immediately. You just need a basic system that is robust enough to weather the occasionally occurring sour market conditions.
Here are the main points for our long trend trading group selection system:
Stock market traders have the largest pool of possible trend candidates.
Money management is always important but not difficult, at least not for the stock market. Just don’t trade on margin, don’t trade short, and make sure that your capital is spread into a few holdings. Two is the absolute minimum and rather aggressive, while more than five adds not much more safety. Diversifying too much means decreasing portfolio performance with stopgaps.
Smooth trends are better than those that are swingy. If a trend has severe downswings or abrupt cliff dives, it is no trend anymore.
A trend has to be at its high, for long trades of course. At least it should show relative strength compared to the whole market. Otherwise caution is recommended.
Growth stocks often produce the best trend thrusts. The best growth company has a single product that is something really new and it should be for the end consumer.
Revenues of that company should already rise substantially. Earnings may behave erratically in the early growth phase, because infrastructural investments are not yet offset by the operational gains.
This is just a short list to give you a starting point for training your trend selection skills. The list could of course be extended by turnaround plays, general market recoveries and more. But to concentrate on possible growth stocks is always a good idea.
Finally you need a system that is able to trade successfully small trends lasting only a few days like this swing trading neural net robot. The trading abilities of this thing alone are sufficient for markets trading in a range. If applied to your selection of longterm growth trend stocks, results will be even better.
It is also possible to switch positions that reach quickly a substantial gain to a buy and hold mode and ride the whole growth phase of their underlying company. The eventual goal of the automated trader is to become a real beach investor.