#TrendTradingStrategy

Trend trading is a strategy that involves using technical indicators to identify the direction of market momentum. It is based on the idea that markets have an element of predictability, so by analysing historical trends and price movements, a trader will be able to forecast what could happen in the future.

Although trend trading itself is considered a strategy, it’s often combined with aspects of other methods depending on the type of trend that’s taking place, and what type of analysis you want to do. All strategies should be used with a proper risk management plan.

Four popular trend trading strategies are:

Breakout trading

Retracement trading

Support and resistance trading

News trading

Breakout trading

Breakout trading is commonly used in very strong trending markets that are continually reaching higher highs or lower lows.

The idea is to identify known levels of support and resistance – where the market has previously reversed in a trend – and look at the momentum behind the current movement. If there is strong momentum as the levels are reached, this may indicate that the market will ‘break out’ of the range and a new trend will form.

2. Retracement trading

Retracement trading is more common in trends that are in the middle of strong and weak – they have some periods of momentum, but some countertrends too.

These temporary changes in direction can provide ideal entry points for traders, as they can get in at a more advantageous price and then take advantage of an ongoing trend.

Retracement traders must ensure a full trend reversal isn’t underway and attach stop losses to their positions to manage that risk.