Trend trading is a strategy that involves identifying and following the direction of market momentum. Traders enter positions in the direction of a prevailing trend—buying in uptrends and selling in downtrends—using tools like moving averages, trendlines, and technical indicators (e.g., MACD or RSI). The goal is to capture profits from sustained market moves by holding positions until signs of trend reversal appear. Effective risk management, including stop-loss and trailing stops, is crucial to protect against sudden reversals. Trend trading suits medium to long-term traders and performs best in markets with clear, strong directional movements.
