No matter what type of business you are in, there comes a time when you are in need of urgent cash but you don’t have it yourself. This kind of situation has been faced by almost every business person out there. You then have to look at alternate ways of gaining money. This could be a loan from a bank or from a non-traditional lender. You could start crowdfunding or ask your family, relatives, or friends for a loan.
There are a lot of ways that you can accomplish this task and get the money that you want. But the question is
- Why should you ask someone else?
- Why can’t you do something yourself so that when the time comes, you have everything that you need and don’t have to put up with things like interest and collateral?
This is where the trend of trading comes in. You might have heard a lot about it from friends, colleagues or must have seen it while browsing the internet. This is one of the things that business people are looking into nowadays as an alternate source of generating money. It’s not a get rich quick scheme, let us tell you that beforehand. You will have to put in effort and time, but with a little practice and a little analysis, you could do well here.
What is Trend Trading?
We have all heard the adage, ‘The trend is your friend’. Mostly all of us don’t know what it actually means and how does it help us in trend trading. Like we said earlier, this is not a get rich quick scheme, so don’t think of it as one. There are people who are trend trading and they are very successful, they even find success but a lot of people end up losing their money. Here we are going to tell you all you need to know about trend trading and how you can successfully achieve another means of income through it.
Trend trading is a straightforward concept. As the name suggests, it is when a trader purchases stocks and makes the decision based on the latest trends. Easy, right? What traders do is to look at various trends about the prices of various stocks and then compare them against their knowledge of the industry and reports that are coming in as well as the overall market trends. They can either do that themselves or they can use services like everforex that tend to all the details and report all the latest trends in the market in easy to understand ways so that the traders can take immediate action.
Sounds simple enough. But is it really? There is more to trend trading than just the simple definition. You will have to put in the time and effort to learn about it and then there is the terminology that can seem confusing in the initial stages. There are various strategies that you can choose from. Depending on the stock and the market situation, some might work better than the others. Trend trading is a very systematic approach that you won’t see on all the other types of trading. When you put in the time and effort, you will soon find out that you don’t have to give a lot of time to it anymore and that you can do it easily enough.
Trend trading basics
Once you start getting into this concept and start learning about it, it will become much easier and you will start getting the hang of things. So, now that we know what trend trading actually is, what else can we learn about it? What type of trends do traders use?
Mostly you will find that trend traders trade on commodities. This is done through price calculations, moving averages, and other techniques. Traders usually find out the trading signals by utilizing the price movements and other technical tools. But that doesn’t mean that all of them are commodity traders. Commodity trends are usually the ones that are being reported on a regular basis which makes it easier to do the analysis and spot the upward trends. For example, a trader can find out that the trend of fast dining is on an upward move and they buy the stocks hoping that they can make some profit.
Make a System
If you want to find stocks that are showing uptrends then you have to make sure that you find a good system that can help you find those trends. People who become good trend traders are the ones who become experts at finding various trends in the market. It could be in their own industry or some other industry that they are interested in. To make a system of finding trends, you need some indicators that can help you build your strategy.
TREND TRADING INDICATORS
To become an exceptional trend trader you need to keep your eyes on four major indicators:
- Moving Averages
These four trend indicators can really help you to observe the trends in any stock’s prices. These are the indicators that can help you become a successful trend trader and ensure that your business is supported throughout.
As the name suggests, moving averages help traders look at the average of the trend instead of looking at all the fluctuations of each stock. Traders can really focus with the help of moving averages and that is why it is one of the major indicators that traders use. All you have to do is to select a timeframe and you can see the average movement of any company’s stock during that time. Spotting trends involves so much more than looking at every spike and downward action and moving average is the one way for you to see the entire trend instead of bits and pieces.
MACD (Moving Average Convergence Divergence)
If you want help in finding out when to buy or sell a stock then MACD is the indicator for you. It uses two moving averages to find that out. Based on the MACD’s fluctuation above and below zero, traders can make an informed decision about whether to buy the stock or not.
RSI (Relative Strength Index)
RSI is a rating that gives you a value between 0 and 100. As you might have guessed, the higher the value the more upswing the stock is experiencing and vice versa. If the RSI goes above 50, it might be telling us that the price is overbought and it could result in a dip. Similarly, if the RSI goes below 50, it could mean that the price is going to see an uptrend and that currently it is oversold.
OBV (On-Balance Volume)
If you want to confirm trends then you need to measure the volume and OBV helps you do exactly that. As a trend trader, you will want to observe the stock’s momentum. This is where OBV comes into play. Once you have analyzed the momentum of the stocks, you can either buy the stocks or short them and make a good profit.
If you want to start trading, then you need a thorough understanding of the indicators and other concepts and of course, you are going to need a strong platform for trading. Once you have these, you can venture into the world of trend trading and make more money than you have ever imagined.