Before you can start using trends to guide your stock trades, you must first understand what stock trends are. A trend is the direction the stock price travels over a given period of time. Stocks can trend up, which means the prices are going up. Or they can trend down, which means prices are dropping. There are both short-term and long-term trends in the market to watch out for.
That said, trends are pretty unpredictable. So you should be wary of the vast number of stock trading systems that promise to predict market trends using complicated indictors. Many of these systems promise to accurately predict what will happen in the market and when. Over time, these indicators will fail, because the only constant in the stock market is change.
Trend trading is a method of risk management that takes into account the current market price (what the stock can be bought or sold for), the market volatility (how big the swings are in the market right now), and the equity level in a trader's account (how much money the investor has to invest).
Here's how it works. A general risk assessment tells the investor when to get into the market(basically when the chance of return is better than 50%), and an evaluation of the trader's equity determines by how much they go in for (too much and you risk going broke fast, too little and you limit your gains).
The trend trading method helps the investor to buy low and sell high. It does this by setting some general rules regarding when to buy a certain stock, how much money to risk on that stock, and the best time to sell (whether the stock is doing great, or if it's tanking).
Like any other stock method, trend trading is based on the unpredictability of the market. The only certainty is the current price of the stock, which is important. However, by studying the trends, the investor can manage and reduce investment risks.
You can learn more about the market and its trends by reading stock trading newsletters dedicated to this trading method. Studying these newsletters can help you deepen your understanding of the trend trading method. However, steer clear of scams and get-rich-quick schemes that offer to sell you stock information. Do your homework. But also don't fall into a false sense of security by blindly following long-successful trend traders. Their long successes can't assure that they won't stumble in the future.
Never take risks you don't personally understand. This is your hard-earned money that you are investing. The best strategy is still to follow a careful, well-planned-out and well-researched approach when trend trading stocks.