Trend trading is a method of operating in the direction of the trend, aiming to follow the trend in and out when there is a clear direction in the market (upward or downward) to earn profits from major price swings.
The following are the complete steps and techniques:
📈 One, What is Trend Trading?
The core idea of trend trading is: 'Follow the trend and do not bet against it for a rebound.'
Upward trend (bullish): The highs are continuously creating new highs, and the lows are also consistently increasing.
Downward trend (bearish): The lows are continuously creating new lows, and the highs are gradually decreasing.
🧭 Two, The Operational Process of Trend Trading
✅ 1. Identify the trend direction
You can determine the trend through the following methods:
Moving average arrangement: For example, 20EMA > 50EMA > 100EMA (bullish arrangement)
High and low point structure: Are the consecutive highs/lows gradually advancing?
Trend lines or channels: Draw ascending/descending trend lines to confirm if they are consistently holding.
✅ 2. Choose entry points (pullback or breakout)
Breakout entry method: Enter when the price breaks through a key resistance level or range consolidation with increased volume.
Pullback entry method: Enter when the price pulls back to the support area or moving average (e.g., 20EMA) and forms a bullish candle.
Example:
In an upward trend, when the price pulls back to the 20EMA and shows a 'long lower shadow + reduced volume', it is a buy signal.
✅ 3. Set stop loss and take profit
Stop loss position: Set below the previous wave's low point, below the trend line, or a fixed percentage (e.g., -2%).
Take profit methods:
Fixed profit ratio (e.g., 1:2 risk-reward ratio).
Trailing take profit: For example, move up with the 20EMA, exit once it breaks below.
✅ 4. Position and Additional Positioning Strategy
After the trend is established, you can add positions in batches (e.g., after breaking a new high).
If the price shows divergence, consolidation with reduced volume, or breaks the trend line, consider taking profits and exiting.
🔍 Three, Common Tools and Indicators
Moving Average (EMA / MA): Determine trends and support/resistance.
ADX (Average Directional Index): >25 indicates a clear trend.
Trend lines / Channels: Manually draw support and resistance areas.
Volume: Increased breakout and reduced volume pullback are valid entry and exit criteria.
🚨 Four, Precautions
Item Description
❌ Do not operate against the trend. Do not guess tops and bottoms before the trend has reversed.
✅ Track macro news. For example, CPI, FOMC, ETF approvals will affect the strength of the trend.
⏳ Be patient with position fluctuations. The trend may have volatility during the day; you need to endure pullbacks.
🧠 Five, Simple Trend Strategy Examples (using BTC as an example)
Conditions:
- The daily price is stable above the 20EMA and 50EMA.
- Recently, three consecutive bullish candles appeared.
- Enter when it bounces back to the 20EMA.
Stop loss: Below the previous low point.
Take profit: Previous high +10% or trailing stop profit.