Trends 101

Submitted by Stock Market News on 17 May, 2011 - 18:22

How to use trends.

It is often said that you can't predict what will happen in the market, the best you can do is ride it and get out when needed. As a newbie you may have heard experienced traders something about ''riding the trend''. Identifying and interpreting trends is one of the basic concepts in technical analysis, so its no wonder that its often used by traders when they establish general rules when trading. Even though a trend can be easily illustrated through a line graph, it has different parts that have different implications in an going trade. However what is really important in looking at a trend?

In trend analysis, it all boils down to working with the trend, and hopefully not make any decisions that may work against it. All you really need is to identify the uptrend and the downtrend. You can do this by plotting pivot points. Higher highs and higher lows equals an uptrend and the opposite is the downtrend. For a newbie it make take from practice, but you'll definitely become more faster in spotting it along the way.

The simplest way to earn using trends is to enter in an uptrend, follow the price, and exit at your established stop loss. Using resistance and support along with volume will help you validate the best time to buy, and the optimal time to make profits.

Of course this sounds much easier than it looks. Interpreting trends is highly subjective. Although any experienced trader can spot an uptrend and a downtrend, what this information means will vary from one trader to another. However, if you have a profitable trading plan, it doesn't matter whose wrong and whose right, as long as your making consistent profits.

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