Investment Strategies: Trend Following | Spread Your Word with Antonimus

July 29, 2010 - 3:29 am - Spread Your Word with Antonimus

Making money is the ultimate goal at the end of the day, and is the objective when it comes to being a trend follower. Some days, you may be in the positive, while some days, your funds will take a dive.

Making money by following trends has critical steps and rules to learn and follow; these are not the typical rules such as buying low and selling high or learning all the confusing mathematical formulas used by the pros to determine which areas are best for investing your money.

When becoming educated as a trend follower, you must concentrate on certain skills such as understanding the market in which to sell, buy and trade.

No one can predict the future with absolute certainty so forecasting the future is a difficult task at best; however, you’ll get a glimpse of what to follow by knowing the trends. Another skill set of trend following is to have a good determination of the amount of funds which you are going to make available for investing and a feel for when to purchase or to sell in the market. Should you hold the money longer than what you have forecast, it is possible that you will lose all of it.

Further, an important item for the beginning trend follower to master is the understanding of exiting a losing position and getting into a winning position.

With the trend trading strategy, traders are not thinking about the indicator of the timing of the trade. They will just look at what amount of money should go in the trade for the amount of time they want to stay in. You can lower your risks using this method. Try to minimize losses as much as possible with this ideology. When the market is of higher volatility, trading sizes are reduced. These traders retain their capital until more lucrative trends appear within the market.

Another thing to take into consideration when trend following is trade timing.

When you use this strategy, you are not as concerned with trade timing as most. What is considered a priority is the amount of money which should be invested on a particular stock. Most successful investors will tell you to cut your losses when it appears that the stock will remain stable.

However if the market is unstable investors will usually see a reduction in trading sizes.

If this is the case, it is recommended that you hold onto a stock until the market improves.

Predicting the future is not a part of the trend following strategy.

The market is full of trends and you just have to know how to recognize them. Once you have mastered this technique, you can expect big returns that will make the effort you put into learning the strategy worthwhile.

These techniques will give you an advantage over investors that use other methods, giving you the ability to react quickly to any fluctuations within the market. Others may experience panic while you sit back calmly and take advantage of the mistakes of others.

From this point on, you will not be like them anymore, losing all kinds of money just because you were worried about the stock’s movement.

Fluctuations in the market will no longer scare you nor will they lead to poor buying choices.

You will have the knowledge of what you should buy and when you should buy it.

You will not be doing any guesswork in trend following. No matter the market, you can find these sorts of trends that ebb and flow. Instead of focusing on short term gains, you will be looking at the big picture which will give you the best dividends.

Since you are dealing with an increasingly fickle and troublesome market, you will profit from this method. When the market changes, a lot of traders freak out and make rash decisions. Since you are trading with a calm, calculated mind, you will prevent yourself from making the same mistakes other traders do, and buy or sell out of panic.

Trend Following

ETFs is the shorthand for Exchange Traded Funds, these are investment funds that can be traded on a number of stock exchanges.

Only authorized investors can buy, sell and trade these funds. ETF trend trading typically enjoys a very significant demand from investors. The ETF is bought and sold on securities exchanges, much like stocks. Unlike mutual funds these are not redeemed of sold ad their net asset value. They are usually traded for securities of equal type and size, and come in groups.

Exactly the same as stocks, when demand for etf is high, the cost will be high. ETFs are advantageous due to the lower costs, flexibility in buying and selling, lower capital gains, market exposure, and transparency. Index ETFs, commodity ETFs, bond, currency, actively managed, exchange traded grantor trusts and leveraged ETFs are all types of ETFs used in etf trend trading. Unlike mutual funds ETFs are a lot more tax efficient. There are reduced capital gains due to the fact that they are not redeemed but are instead sold on the stock market.

Only when the investor sells shares are the capital gains realized. Conventional mutual funds are usually less tax efficient than ETFs. Although there are still disadvantages to ETFs, as with anything.

More often than not, the pros are more significant than the cons.

Don’t let the volatility of the stock market prevent you from successful investing. Using the strategy of trend following has worked for many investors over the years and can also work for you. You will learn how to distinguish between profitable and unprofitable trades. All you need to do is follow the rules and not deviate from them in the slightest.

Any changes to strategy will reduce your profits. This is not what you want to happen. All you need is some patience and to spend time learning this strategy, once you do you will be successful and the kind of person others ask for help.

It’s easier than you think.

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