What Exactly Makes an Investment Strategy a Trend Trading Strategy?
By definition, when you are a trend trader, you follow a trading system and you stick with it for the duration that your system requires. It’s pretty simple, really: You create or find a system that you trust to be successful over a length of time. You get to the point of trusting that system because you, or whomever has created the system, test and back-test the numbers until you reach the point that you can be certain that your system will make money. The most important thing is to stick with that system, no matter what. Easy to summarize, but a bit tricky to execute.
Don’t get me wrong, trend trading isn’t rocket science. It is a tried-and-true investment strategy that has made billions of dollars over decades. It uses various indicators to determine market trends and benefit from both sides of that market, enjoying the profits from both ups and downs of the markets. This up and down movement, the volatility, is what makes successful trades, rather than how well the market is doing on a given day.
We all have an idea in mind when we hear the word “trend,” but for investing, it’s about much more than what is “hot” at a given time like Fall Fashions or current video games. It’s more about sticking with your system and it’s trends, as it is about spotting a trend.
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