Trend trading is easy, but just in hindsight when you take a good looking chart and happily say that one should have entered here and exited there. As soon as one tries that in reality, trends astonishingly don’t run further after the position got established. This is a bit harsh, but it has more than a grain of truth in it.
For successfully trading trends more is necessary. One trading method is the selection. Don’t try to buy all trends, instead preselect. An invaluable signal, which is increasing the probability that a trend has still potential after it got noticed, may be found in fundamental data. The purest form of trending fundamentals is a company in a growth mood. Its stock will likely follow the trending mood of its master.
If the product is right, such growth trends may be intact for many quarters. There are companies with dozens quarters in a row of rising revenues with no single miss. Calculate the probability of such an occurrence by chance you random walk believers! All right, I do it for you. Twenty up-quarters equal a chance by random of less than 1 to a million.
With the preselection of a growth stock instead of some more complex macroeconomic situation that is difficult to comprehend the chances go up to pick a trend not just before its reversal.
The other trick is simply to try it more often. There are long running trends and you may hop onto them in the middle if it is just possible to try often enough. Minimizing the size of the small loss is the key to success here. With a working entry technique one can compensate for an otherwise poor long trend selection. The stop loss method is the most direct consequence of buying into a trend and therefore a robust entry technique for trend trading.
If so, what is more promising than applying this success method twice? Search for intraday trends that themselves offer a fine opportunity to buy into a stock with little risk by using a tight stop limit. If everything goes right, the stock gets off the launching pad and then dragged further along by the forces of the long-term trend.
There is even a method in the market that is called Triple Trend, which probably means enter a microtrend in a medium trend in the long-term trend. Triple Trend or not, I guess one should be satisfied with a double trend. Triple trends are probably much harder to find and they will not compensate this disadvantage with so much better trading probabilities.
