Trend trading strategies are fundamentally different from those of the day trader, however. While a day trader is trying to capitalize on volatility, the trend trader is trying to make non-volatile decisions. A trend trader may hold a position in a stock for weeks, months, or even a year or so. Trend traders are interested in liquidity, not volatility, for the most part.

What are the strategic underpinnings of the trend trader? Why is this a superior trading strategy to day trading for many, many people?

*Trend trading does not require minute-by-minute market monitoring.

*Even short-term trend trading is not as stressful as day trading.

*Trend traders can get paid stock dividends as an added bonus.

*Trend trading allows for more patience, which means that changes that take place in the more-distant future can be capitalized upon.

Short-term trend traders can adjust their time horizons accordingly with their next entered-into position if they sense the need to do so.

However, no system is perfect, and trend trading does have some strategic pitfalls that must be accounted for.

*A day’s good news can be wiped out overnight or the very next day, which can be disheartening and frustrating, and if your time horizon is short-term it can be a profit-killer.

*You have to be very astute about your stop-loss orders. Screwing these up can cost you a bundle of money.

*The longer your trading horizon, the more opportunities for profits you have but the more risk you run of losing focus and missing the golden opportunity.

Some people use a variant on the theme of trend trading–counter-trend trading. This is a favorite method of the contrarian investors, whose philosophy is that to be successful you must always do the exact opposite of what the vast majority of other investors are doing. This strategy involves applying the “buy low-sell high” strategy to trend trading. So an upward trend is a sell signal, whereas a downward trend is a buy signal to them.

So, trend trading strategies differ pretty significantly from day trader strategies, even in the short term. This needs to be kept in mind at all times.

One of the most often used trend trading systems out there is the GMMA, or the Guppy Multiple Moving Average. With the GMMA, the trader puts together two different groups of moving averages that have different time periods.

One of these groups is quite often used by traders with a short-term horizon. The number of days in their time horizon is, most of the time, one of the following: three, five, eight, 10, 12, or 15. For those who are involved with long-term investing as trend traders, they use time frames that consist of 30, 35, 40, 45, 50, or 60 days.

Traders use this relationship between these two different groups of moving averages for determining whether or not the outlook of the short-term traders squares with the long-term traders. It is thought that this cross-checking enables greater objectivity and, therefore, makes sure that the traders aren’t relying on their emotions to make their decisions.

Changing trends get identified by the point where the two different groups of moving averages intersect. A bullish trend means that the short-term MAs are above the long-term MAs, while of course the opposite is true in the event of a bearish trend: the short-term MAs are below those of the long-term MAs.

Trend traders may also use the Exponential Moving Average, or EMA. With this tool, the trader places more weight for decision making on the latest moving average, although he pays attention to all of them within his time horizon. So EMA also gets called the “exponentially weighted moving average”. An EMA responds faster to recent price changes than does a simple MA. The 12-day and 26-day EMAs are the most widely used short-term averages; they get used for producing indicators such as the MACD (moving average convergence divergence) and the PPO (percentage price oscillator). Long-term trend traders would look to the 50-day and 200-day EMAs for their signals.

For trend trading, there also needs to be risk management in place in the system. The simplest way of managing risk is to use the 2% rule. This very simply means that you as a trader take the value of your investment account or portfolio and calculate what 2% of it is. This is always the largest amount that you will invest into trend trading at any given time. The 2% rule keeps you from losing your shirt and your house with your investments. If you make money, you add that to your total and can risk more and more. But if you lose money, you don’t lose that much compared to your total money, plus you keep diminishing your total investment until you start earning more again.

Learn how you can average 6.43% monthly returns in just 5-10 minutes a night after the markets close.

By “trend” we mean that the stock is moving in a particular direction without much back-and-forth (that is, up-and-down) movement. A trend trader is assuming that the stock in question is going to continue in its particular direction for a significant enough amount of time to make it worthwhile to invest in that momentum and profit from it.

What that significant time frame is all depends on the trader in question. In fact, that time frame can be as short as, say, 15 minutes or as long as a few months. But however long his chosen time horizon is, the trend trader will remain in the position he opened until he feels that the stock has reached its resistance and is about to reverse its trending. He then closes his position and takes profits.

Clearly, the great risk with trending trading is that the wrong assumption has been made. This would mean that the stock is not going to continue in its particular direction, at least not for a significant amount of time. If there is too much volatility, it can be hard to read a trend, or easy to misread one (see one that doesn’t exist).

Trend trading is one of the most widely used of all stock and options trading strategies. Institutional fund managers routinely use it to try to get the biggest gains for their clients (and the biggest fees or commissions for themselves at the same time). The most commonly used tool for trying to spot these trends is the A-D Index, or the Advance-Decline Index. The A-D Index represents the total of the difference between the number of advancing securities and the number of declining securities. The simple formula that is used to calculate it is:

(Advances – Declines) + Previous Advance/Decline Index Value

An “advance” simply means that a stock has ended the last trading session up for that session, while a “decline” is the opposite. Traders follow these sessions and how they ended up by plotting an A-D chart, and this creates an “Advance/Decline Line”. In this way, they seek to avoid being taken in by any day-to-day market mood swings–either too much greedy enthusiasm or too much unwarranted fear.

It’s pretty easy to interpret the A-D Index or Line:

*Market down but A-D up means strong uptrend
*Market down plus A-D down means weak uptrend
*Market down plus A-D down means strong downtrend
*Market down but A-D up means weak downtrend

So, trend trading is a way of seeking to make money from a rational approach to an irrational environment. Other people create the trends, and then as the trader you simply leverage them for your gain.

Learn how you can get 6% gains each month in just 5-10 minutes a night taking advantage of trends and ETF Trend Trading.

That doesn’t mean I don’t like risk.  In the real world, I’m an entrepreneur and taking risks comes with the territory.  It doesn’t bother me.

However, I feel like there’s a big difference between me and people gambling in Vegas.  I’m able to stack the odds in my favor.  In Vegas, you close your eyes and hope lady fate is feeling generous that day.  To me that just seems stupid.  I’d rather not take risks where the result is completely up to chance.

So what does this have to do with day trading?  Everything.  Did you know that only 5% of people doing day trading ever make any money?  Most people lose money and some get completely wiped out when they try it.  Why?  They’re not stacking the odds in their favor and they’re taking big unnecessary risks.

Low Risk Day Trading Strategies

So if you’d like to join the land of the 5%, let me give you a few low risk day trading strategies you can use to make excellent returns (about 12.8% per month – that’ll more than quadruple your money in a year)

1) Use Multiple Time Frames

To get a clear picture of what’s happening in the market, you’ll want to make sure you’re looking at multiple time frames.  As an example, let’s say you’re looking 5 minute time frames to enter your trades.  You’ll also want to check out 30 minute or 1 hour time frames to get an idea of where the market is generally headed.

2) Cut Your Losses

The mantra of the day trader should be “live to fight another day.”  That means that you need to put a stop loss in place on every trade you do otherwise you’re playing a dangerous game of Russian roulette with your money and some day it’s going to wipe you out.

You’re going to have trades where you lose money, especially if you’re day trading.  Just don’t allow any single loss to deal a fatal blow to your entire portfolio.

3) Trade with the Trend

Say it with me.  “The trend is your friend.”  The trend is your friend.  This tactic of following trends has created many millionaires and I can’t even tell you how many books have been written on this topic.  Just visit Amazon and check a few of them out.

Learn how to use trend trading to get 12.8% returns per month with day trading or 6.43% monthly returns in just 5-10 minutes a day after the markets have closed by getting this free trend trading pdf report.

ETF Trading

Exchange Traded Funds (ETF) have been gaining attention recently and are quickly becoming the  preferred alternative to mutual funds.

What Is An Exchange Traded Fund?

ETFs are securities that are made up of many different stocks.  In that way, it’s quite similar to a mutual fund.  However, with and ETF, the stocks all have something in common (we’ll get to why that’s such a huge advantage in a bit).   It may be based on an index or an industry sector.  Those are the most common.  Sometimes, a fund may be based on the country the companies are tied to, but this isn’t common.

Like mutual funds, ETFs are diversified investments, so your risk of loss is roughly the same as it would be with mutual funds.  However, they hold several advantages over mutual funds.

Top 4 Benefits Of Exchange Traded Funds

1) Trending – Due to the fact that the stocks all have something in common, they tend to trend more predictably that regular stocks.  That means whether the trend goes up or down, you can make significant returns with very little effort (Learn how to make money from ETF Trend Trading).  This is the biggest advantage and the reason why you should consider adding ETFs to your portfolio.

2) Bought And Sold Like Stocks – And ETF is bought and sold just like a regular stock so stop-loss and limit orders are available.   ETFs, unlike mutual funds, are quite liquid investments, and some trade millions of shares per day.

3) Lower Fees – Another selling point of ETFs is their low fees, some as low as .2%.  Since the companies all have something in common, the amount spent on market analysis is significantly reduced.

4) Transparency – While a mutual fund only reports their holdings twice a year, an ETF can be viewed in real time any time you want.

Learn how to get 6% monthly returns with ETF Trading using low risk trading methods in just 5-10 minutes a day.