How to Utilize Trend Trading?
Day traders have many different approaches for selecting the investments that best fit into their particular strategy. One of these is trading on trends. Even within that particular strategy there are multiple ways of detecting trends and determining whether or not using trends as your driver is the right approach for you.
Some common indicators used by traders for detecting trends are:
Moving averages smooth a graph by creating a single line that is easily distinguished from the standpoint of remaining stable, moving in an upwards direction, or on a downward trend. By comparing the timeline of two different ranges, such as a 50-day average and 200-day average intersecting on the same chart a trader can read a buy trigger when the 50-day average intersects the 200-day on an upward movement. Conversely when the 50-day moving average crosses the 200-day line on a downward trend a sell indicator is triggered. This is a reasonably simple way to recognize trend movements that drive your decisions to buy and sell.
On Balance Volume Indicator (OBV)
The OBV indicator combines up day and down day volumes to display a single-line indicator generated by adding volumes from the up days then subtracting volumes from the down days. The result presents an indication of up or down trends. An OBV that is rising should indicate a rise in share prices and vice-versa. Again, this is a fairly simple concept for even beginners to grasp, but like most indicators it is not foolproof.
Relative Strength Index (RSI)
RSI provides day traders with an oscillating value that provides a quick view of price movement. A value above 70 typically indicates the price is in an uptrend especially if it remains at that level for a long period of time. Downward trends are indicated by a value below 30. A stock that is trending low can stay at 30 or lower for sustained periods.
There are other trend indicators and detection tools available to day traders that may also help you select the stocks that fit into your individual strategy.
Having selected trending tools and indexes that appear to match your trading strategy and psychology be sure to apply due diligence to your thought process before proceeding, to make sure your choice minimizes the risk factor. There are additional tools that allow you to evaluate the financial stability of a company and earnings projections that may add to your confidence level for buying or that may alert you to negative factors that impact your choice.
Trend Trading – Right for Your Strategy?
Trends can be valuable tools in making your investment decisions but remember that no tool is perfect and all investment is at risk. Investigate trends and their meanings thoroughly before relying on them for critical buy and sell decisions. Utilize an online broker that provides such analysis tools that make trend trading a good option for you.
SureTrader tools can help you monitor stocks and other market segments that allow you to track trends and make decisions that enhance your trading sessions. As a leading online broker SureTrader provides clients with web content that can keep you informed of current news in real time that may impact your individual strategy. SureTrader also provides friendly and courteous support available to our clients on a 24×7 basis to help you resolve any problems.
SureTrader’s services are available at your desktop, laptop, and mobile devices to provide flexible and reliable access to our services. We support both iOS and Android platforms. Access to services is available anywhere, anytime for quick and easy trades even in after-hours trading.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.