By Vytautas Zilenas
Trend trading was the first strategy that I mastered when I became a forex trader. When I started trading I experienced only losses for about two years. To tell the truth, I was almost ready to give my trading career when I suddenly noticed some things that are repetitive in the market. These things were trends and I decided that I have to learn this method. When I started analyzing my charts trying to identify trends I saw that this is probably the best trading system that can be used. I also read a lot of material on the topic and I saw that practically all great traders and investors traded only at specific times in the market and those times were when markets were trending. So, when do markets trend?
I noticed that trends develop during financial booms and crises. These are not the only periods when financial markets are in a trend, but when these times come, the majority of markets do trend. These are times when money comes in and comes out of the markets. During a boom a lot of money is poured into markets as most investors invest in various market sectors. During a crisis lots of people try to get out of the markets and money leaves markets. These are also times when traders can make a lot of money, because as many positions are closed prices start collapsing very fast and if you have a sell position open, you make a lot of money and very fast.
Trends can be short term and long term. I can assure you that we have a trend in most financial markets at least once a year. Most often there are two trends a year. So, if you are trading currency market where currencies are paired you can grab even more trends, or you can trend trade multiple pairs as most often if one pair starts trending, it drags other pairs into a trend as well. If a gbp/usd starts going upwards or downwards it will most probably take gbp/jpy, gbp/cad and other pound pairs with it.
So, as I said if you want to trade a trend booms and crises are very good seasons for that. A trend also develops when a security has been for many months in a range and then suddenly some important piece of news reaches a market forcing the security to get out of the range and start trending. This creates opportunities to open multiple positions as trends usually last longer than a week. More often trends last for a few months and sometimes even longer. So, if you are able to build a line of positions, you can multiply your account in a very short period of time. I hope you now see how profitable it is to trade in a trend.
Trend trading will always remain the best trading system and most probably a crisis will be the best period of time to use this kind of trading system.