Trend Trading – An Easy Way to Make Money in the Stock Market
Trend trading – how hard can it be?
You would think that trend trading should be one of the easiest ways to make money in the stock markets, you buy the ones that are going up and sell the ones that are going down, how hard can that be? Well as it turns out, it is one of the hardest things for most active traders to do. Why?
The number one reason is that many get their entries all wrong. Instead of waiting for the market to tell them when a trend is beginning, too many traders get drawn in to calling the tops and bottoms and of course, the odds are against them from the start.
Trends are just that – trends. When a market is trending, the odds are already stacked against any trader that is calling a turn and betting against the flow.
Are you a Trend Trader?
If you are the type of person that bets on Black because it landed in Red a couple of times, then trend trading is probably never going to work for you. Trend traders would place their money on Red.
How much of your money would you have to lose on Black before you decided enough was enough and then decide to go for the Red?
A lot of folks would end up going all the way, the more times it landed in Red the more convinced they would be that the next one would have to be Black. Some will get so convinced that they may even double their stake on the next one – it simply must land in Black next time ….. Yeah, you guessed it, it came in Red again!
Ok, one more time, a big one …. it MUST be Black this time!
OK I am losing too much money – I will go for the Red this time …
Eh, Black! What happened? Oh well, if it was Black this time, the odds are that it will probably be back to Red next time …
OK next time … oh man – NOT AGAIN!
Yeah, that brings us to the second most reasonably reason folks are to fail at trend trading, it is that no sooner has the market turned down, then all they want to do is to start buying it again.
Does all this sound familiar? Does it resemble your trading results?
Well do not worry, take heart from the fact that we all walked through that stage and it has happened to us all at some point and still does occasionally, even to the most experienced traders.
Learn from past mistakes to stay in the game
The main thing is to learn from your trading mistakes. Active traders that learn quickly will stay in the game, those that do not learn quickly will simply become one of the statistics. No trading strategy is ever going to return a 100% success rate, technical analysis and the stock market simply does not work like that.
Successful traders know this only too well and if they are having a bad run, they will have developed different strategies to manage these phases. These can range from trading a different market instead, or reducing trade sizes up to taking a complete break away from the markets to break the bad run, or reassess their strategy and see where it is going wrong.
So how hard could trend trading be?
Well, you just buy the ones that are going up and sell the ones that are going down, you only have to work out which ones are going up and which ones are going down but any kid with a ruler could do it, could not They? … so how hard can it be?