5 questions to ask when trading trends

If you are new to trading, then you know that trend trading is one of the most popular ways to trade assets.

Because trends can continue to make money until they end, traders spend a lot of time honing their trend trading skills.

Here are five questions to ask yourself when thinking about or doing trend trading:

1. Do you use tools and indicators that are useful for trend trading?

It’s tempting to highlight as many indicators as you can fit on your chart, but you should only pay attention to the ones that can help you trade the TREND.

This means using trend indicators such as moving averages to see the general direction of prices, or momentum indicators such as the ADX and CCI to see if a trend is running out or just starting.

Even price action traders should be careful to mark only clear trend lines instead of drawing lines around clearly broken or immature (read: less than three highs or lows) trends.

2. Can/should I buy on returns?

Usually, a trend is more sustainable when it has pullbacks. These pullbacks provide an opportunity to enter the trend or increase the position size. However, that doesn’t mean you have to pull the trigger on EVERY recoil.

On the one hand, entering or adding a position increases the mental pressure to close the trade at a profit. This could lead to mistakes that could be avoided if you weren’t so concerned about your profits and losses.

You should only enter a pullback if it is part of your trading plan. If it doesn’t change the way your trade is processed and if you don’t exceed the maximum risk per trade, then feel free to pull the trigger.

3. Are you clicking responsibly?

Rollbacks are not the only opportunity to add positions. You can also press your trades by “maximizing” positions at other points while the price action is still confirming your biases.

But scaling requires more than simply adding units whenever you feel like it.

You need to determine the exact price conditions for when you will be adding, know how much you will be adding each time, AND have a plan to lock in your profits or pay off your losses when the trend eventually ends.

4. Is the trend STILL your friend?

Like good Disney movie remakes, fidget spinners, and large public gatherings, all good things come to an end.

Even traders admit that the saying “the trend is your friend” really means “the trend is your friend”. to the end when it bends.”

To increase trend trading, you must be prepared for when the trend ends. That means constantly assessing its momentum and checking for fundamental and technical catalysts that could kill it.

When you know the structure and potential of a trend, you can better place your entries and exits to maximize profits and minimize losses.

5. Is trading against the trend for you?

Another way to capitalize on a trend is to profit from its reversal.

However, trading against the trend is not for everyone! It takes time, patience and a LOT of discipline to successfully trade against an apparent trend.

But with a lot of experience and after you have done your homework, picking tops and bottoms is as good as any trading technique as long as you ALWAYS remember to manage your risk properly.

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