What is trend trading?

Trend trading is a way of trading to profit from market trends. That is, trend-following traders only trade when the market has a trend, up or down, and when the market goes sideways or accumulates, it will stand outside. Their advantage also comes from this.

Trend Trading - Key Elements

The first is that the trader must identify the trend by a certain instrument, maybe just candlesticks or use an indicator; then you have to know how to find your entry point, and finally how to exit the market when the trend ends or changes.

1, Identify the trend and enter an order:

Trends can be identified only by market structure - peaks and troughs.

An uptrend exists when the price makes higher highs and higher lows. A downtrend exists when the price makes lower highs and lower lows.

The uptrend is broken when the bottom leading to the highest high is broken. The downtrend is broken when the top leading to the lowest low is broken. The trend may be broken, but it is not sure that it will reverse to the remaining trend, which can be turned sideways or accumulate.

Trends can be determined using the following indicators:

a, Average line:

An uptrend exists when the moving average is sloping up and the price is above the consistent MA. A downtrend exists when the MA is sloping down and the price is below the consistent MA. There is no trend when the price crosses the MA line and the MA is flat.

This is a very intuitive and easy way to identify a Trend. The mid-term trend is using MA50, short-term MA is 21, and long-term is MA 200.

b, MACD histogram

MACD is a very famous trend indicator. We only use red and green bars - the MACD histogram is used to determine a trend.

When the histogram turns green, the market has an uptrend. When the Histogram turns red, the market has a downtrend.

This is also very easy and also quite accurate. The histogram is the difference between the signal line and the MACD line, only when there is a cross they change color.

c, RSI

RSI is also an indicator similar to MACD. However, it is used to identify an excess of the market to take profit or exit a position.

When RSI> 70, the market is overbought and should not buy anymore. When the RSI <30, the market is being oversold and should no longer sell.