Trend trading strategy aims to follow a chart trend either up or down. Ideally traders would open their position at the beginning of the trend and close it at the end of the trend regardless of the profit/loss amount.
The process will repeat in the opposite direction following the trend in the new direction.
The strategy isn’t bullet prove. But with practice, experience and market knowledge it could be possible to improve profits and reduce losses.
Some of the most common indicators for trend following are moving averages, MACD and Parabolic SAR.
CFDs are the right instrument to put into practice a trend trading strategy
CFD is the right tool to put into practice a trend trading strategy. Trend trading might sound easy but in reality it is as difficult as any other strategy. It takes time to master and the most common mistake is trying to predict the trend direction rather than follow it.
Most trader will open the position before the trend turn, instead of waiting for the confirmation and then entering the trend. The idea of predicting the trend direction come from trying to maximize profits but what it actually does is to increases the risk.
Other common mistake is failing to close the position and actually not following the trend. New traders tend to hold onto losses because they are sure that the price will eventually turn and most probably will, after they stop loss has been executed.
Discipline is essential when using leverage products. And getting use to have losses is actually beneficial as far as profits are higher.
The Trend Trading Strategy is one among the best CFD trading strategy that you can use today and be guaranteed of getting absolutely good returns in your trade. That is for the fact that this trading strategy was designed based on extensive research by professionals in the CFD trade. Therefore, if you are looking forward to dive into the sea of CFD trading, the secret of making it big is employing the Trend Trading Strategy.
Trend Trading Strategy has been praised for a number of reasons. For instance, seasoned traders are usually of the opinion that this is simply the trading strategy that should be recommended to both the traders who are making their first step into this industry as well as those who are already established. However, it should be noted that, contrary to what many people believes, the trend trading strategy is not an easy strategy to use. It requires the trader to master it before putting it into use.
The best secret is it to follow the trend rather than trying to predict how it will turn out. The prediction is usually known to up the risk of trading. That is exactly what one ought to avoid. Another mistake that the trend trading strategy tries to avoid in the world of CFD trading is not closing the position, a habit which many traders have found it difficult to stop. It is, however, risky. In most cases, this happens among new traders.
The trend trading strategy and methods has managed to stand out as the most effective strategy to use thanks to its realistic objectives. This CFD trading strategy focuses on allowing or rather giving traders the solutions they need in their day to day CFD trading. On the other hand, the trend trading strategy tries to caution traders against the many risks that come with CFD trading.
Trend trading strategy and methods also does help traders in realizing the best time to enter into a trade while keeping in mind the technical analysis trends.
The graph shown above shows the two main entry points that a trader can use.
Trend trading strategy seeks to make traders learn the art of following trends regardless of whether it is going up or even down. Nonetheless, this is something that traders will need to learn with a willing heart in order to make it much simpler lest he will definitely get it to be a tough walk.
Markets and Instruments
In CFD trading, it is very important to tell the best of all markets where you will make your investments. Usually, the market choice that you make will play a big role in determining either the success or failure of your trade. Therefore, you as a CFD trader need to be extremely careful in selecting the market that you will invest in.
Trend trading strategy can be used in a various markets such as stocks, indices, commodities, currencies, crude oil, precious metals and forex.
However, apart from the fact that trend strategy can be used in all the above mentioned markets, it is always a wise decision for a trader to take some time and do a thorough research as far as these markets are concerned. The trend strategy will help you get an insight into all these markets before injecting your cash into any of them. Another thing that a trader needs to choose is the instrument to use. When choosing a tool to trade with, you ought to remember that the better the tool you choose the more effective your trade will be and you will definitely get good returns in your trade.
The Meta Trader 4, which is shown below, is one of the best tools to use in CFD trading today. This tool is not only faster and reliable but also secure. It does also come with amazing features.
Another secret of making it big in CFD trading is being aware of the best time frames to either enter or exit a trade. This is extremely important and therefore, if in any case you are looking forward in start CFD trading, the first thing you ought to do a lot of research on is the best time frames buy or sell.
But there are certain factors that must inform your decision before deciding on whether to pick a certain time frame or not. They include whether you want to be in the market on a long term or short term basis. You must be very clear on that. Trend trading strategy does however allow trader the liberty to choose on whether they will be in the market for only one day, a few weeks or even for months.
Usually, there are time frames that are commonly used in CFD trading. They include;
This time frame normally allows the trader to know the best time to sell off his stocks.
The trend chart is mostly used in long term trading. It a guiding tool for the CFD trader as far as telling the perfect time to buy stocks is concerned. This time frame gives the trader a signal on the best time to do exactly that.
This time frame is very important because it does tell the trader when to enter or exit a market to avoid the risks that come with CXFD trading.
Nowadays, here several tools that a trader can use in CFD trading. It only requires a trader to choose the tool that he believes is best for him based on the market and trade he is involved in. the tools used in CFD trading is known to have a direct bearing on the amount of either profits or loss a trader will make. Based on its features and the number of traders using it, CFD trader can be said to be one among the widely used tool in CFD trading today.
Millions of CFD traders find this tool very easy to use. They also like it thanks to the many features that CFD trader presents to them. CFD trader comes with 8 charts, several time frames and more than 85 technical indicators.
This tool can be downloaded and installed with a lot of ease.
Before you start
It is common sense that before you do anything, you ought to be fully prepared and CFD trading is not an exception either. There are many things that you must put into consideration. First, you must understand CFD trading completely. CFD trading is not a place or industry where you will need to take any chances, you must be very smart.
The Contract for Difference requires that a trader is armed with all the necessary and at least the basic skills before taking to the market to trade the traders who have been doing for the rest couple of years and have gained lots of experience.
Your first stop when thinking of taking part in the CFD trading should be at your preferred broker. Here, you will need to sign an agreement with your broker in order to be allowed to trade. The second and most important step is to determine the market you are interested in and then make the required investment. That is after fulfilling all the requirements of CFD trading.
Step by step guide
Below are easy steps that you will need to follow in order to be allowed into Contract for Difference trade.
- Set target for your trade. It is important that you set targets in your trading. They will certainly be more of a road map for your business because they will define where you would like to be as well as what you would like to achieve as a business. However, your targets must be absolutely realistic.
- Apply for a demo account from your potential broker. Open a demo account and try out CFD trading using that demo account. That will give you a feel of what will be expected of you once you start CFD trading.
- Open a real trading account. Here, you will need to do a thorough research and come up with the best broker of all. That is for the reason that, the broker that you will choose to work with will determine a big deal how your CFD trading will move on. Seek to identify all the charges that come with working with any broker. Some are known to have a lot of hidden charges which might eventually play a big role in the downfall of your trade.
- Load your trading account and start trading
Your position is paramount in CFD trading and that is why you will need to define your position at any given time. As early stated, CFD trading is not a place of taking chances not unless you are only to make losses out of your investments. As a result, make a wise decision and choice when taking your position.
Risks and money management
In CFD trading, how best you manage your money as well as risks will directly determine how long you will be in this trade. In other words, risks and money management is crucial in CFD trading. In order to be on safe grounds as far as CFD trading is concerned, you need to risk a small percentage of your initial capital as opposed to risking your entire capital.
On the other hand, you should put in place tested and approved means to manage your risks. They include stop loss orders. These mechanisms have been tried and found effective.
Exit strategy should always be at the finger tips of any CFD trader. The strategy provides the trader the means to use when he wants to exit a certain market. It doesn’t matter whether you have made profits or losses, this strategy is tailored to allow the trader avoid any more losses.
Exit strategy is central in trend trading strategy and that is why it helps traders to monitor the market trends as well as trend lines in order to tell when to exit that particular trade.
Recommended Broker, software and platform
Recommending an excellent broker, effective software and platform is one of the most important roles that trend trading strategy seeks to accomplish. This is done to help traders who might be lost on which broker is bets to work with, which software is good in CFD trading as well as which platform should one use in this trade. However, we don’t do our recommendations based on hearsay; we take it more of our responsibility to base our recommendation on extensive research on all or at least a good number of brokers in the CFD trading today.
Therefore, we strongly recommend Ava trade thanks to a lot of benefits that this broker gives to traders. Apart from the benefits that a trader stands to enjoy by working with this broker, AvaTrade is highly rated among all brokers, enjoying a 4 out of 5 stars rating. In addition, this broker charges no commissions, no deposits charges, zero rollovers, zero trading fees and zero margin calls charges. These are just a few of the many advantages that we found inn working with Ava Trade.
On the other hand, Ava Trade presents to the trader a wide range of markets too choose from such as currencies, metals and crude oil to mention but a few. This broker is also fully regulated and therefore, your investment will be in safe hands.
Ava mobile, Metatrader and Avatrader, all provided by Ava trade, are recommended as the best platforms to use in CFD trading. They are efficient as well as user friendly. Moreover, trend trading strategy fully suggests Ava Java as the most easy-to-use yet effective software to use in CFD trading.