Why The Trend Is Your Friend In Trading
Admin
Jan 20, 2022
One of the most popular terms in the trading world is “the trend is your friend”. This term has most definitely stood the test of time, many traders argue that it is critical in any trading plan. In this blog, we explore why you should consider the trend as your friend, that is.. Until it ends!
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What is a trend?
In simple trading terms, a trend can be defined as the general direction in which the price of an asset is moving or developing. Generally, there are three different trends that an asset can follow over a period of time, namely: Upwards, downwards or sideways. If you were to look at a chart of a particular trading pair in any timeframe, it should be fairly easy to identify it in terms of one of the three categories mentioned above.
Why you should trade the trend
There is no secret trading strategy that will give you a one hundred percent win ratio.. If someone tries to convince you of that, then they’re either lying or trying to scam you!
Since there is no one hundred percent win ratio, traders are always on the lookout for things that can improve their chances of closing a winning trade. One of these things is the trend. Identifying a trend is arguably one of the easiest chart patterns to recognise, especially for a newbie trader. It's easy to see the general direction of the price movement instead of trying to identify complex chart patterns. Learning how to trade the trend is the easiest way to take advantage of the market direction.
Although there is no way to know how long a trend will continue, a trend is regarded as a trend due to the fact that it has moved in a general direction for a relatively long period of time. Traders use historical price movements as a guide to determine the probability that the trend will continue in the same direction.
Trends can make you more profitable
Trend trading is a relatively simple trading strategy, however, it is not only used for its simplicity, but also because of its profitability.
Since trends are mostly long-term movements, the rewards for successful trend trades are often much larger than the risk taken on the trade. So by trading the trend, you not only have a greater chance of being profitable, but your risk is usually substantially lower (provided you have used correct risk management), allowing you to become even more profitable.
We encourage users to take extreme caution when trading crypto. As always, please do your own research, and devise your own strategies. This is not financial advice!
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