Trend trading strategy has always been the best way to avoid losing orders in the stock market. Every professional trader is taking their trades in the stock market in favor of the existing trend. On the other hand, new participants in the stock market are taking their trades in an aggressive manner and trying to earn a big amount of profit without respecting the market trend. Thus, they keep on losing money most of the time.
To become good at the stock trading business, you need to consider the overall direction of the trend. In this content, we will share some professional techniques by which you can ride a major trend without having any major obstacles. So, read this article very carefully.
Evaluating the daily time frame
You need to start evaluating the higher time frame to find the overall direction of the trend. If you keep on relying on the lower time frame, chances are high you will never learn to find the good trade signals in the market. The professional traders usually determine the trend in the daily time frame as it gives a much more accurate reading.
Since the daily time frame is a bit boring some traders often rely on the hourly time frame. But if you chose to trade in the hourly time frame, you should be extremely cautious about your trade execution process. In fact, the risk factor should be less than 1% of your account balance.
Learning the candlestick patterns
Japanese candlestick is very popular in the investment business. Most of the experienced traders rely on Japanese candlestick patterns to find the best trade setups in the market. Navigate to this website and learn about the importance of Japanese candlestick patterns in trend trading methods. Once you know about the basics of the price action trading strategy, you can use this technique to trade the major trend.
Instead of setting up pending orders at the trend line support or resistance level, you should be looking for reliable price action confirmation signals. As you learn to use this technique, you will become much more confident with your actions, and thus making regular profit is not going to be a tough task.
Focus on the prime indicators
You might be thinking about what the prime indicators in the stock market are. Since you are discussing the trend trading method, the prime indicators are going to be the moving average. With the help of the moving average, you can easily determine whether you have assessed the trend line in an effective way or not. For instance, you may use the 200 period SMA to determine the overall direction of the trend in the daily time frame.
If the price trades above the 200 SMA, you should be looking for the long trade setup only. On the contrary, if the price trades below it, look for the short trade setup. You may also use the oscillators to find the strength of the trend and it will definitely help you to ride the key trend.
Use the trailing stop loss
The use of trailing stop loss is a must when it comes to riding the trend in the stock market. By using the simple trailing stop loss you should be able to ride the major trend with a high level of accuracy. Some novice traders often think that using the trailing stop loss is not a good idea to ride the major trend. But this is not all true. If you do some digging on the internet, you will realize that using the trailing stop loss features is by far the most effective way to ride the trend.
While using it, make sure you rely on the minor support and resistance level. If you place the stops in a random way, you will keep on losing money most of the time and thus you will never learn the proper way to execute the trades in favor of the key trend.