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Trend trading is the base for the most significant movements in financial markets. If you have ever heard of the term "the trend is your friend" you have come to the right article.
It involves capitalizing the price direction of an instrument during a prolonged period and, in the case of most serious strategies, striving for a substantial equity compound by adding more to winning positions or holding an asset as part of a portfolio for an investment approach.
This technique will require experience in detecting price zones susceptible to experiencing weakness or strength during the price path. Pullbacks, support, and resistance are concepts traders need to master to spot and enter successful trades during trending markets.
When it comes to implementing the most serious trend strategies, we could say traders should look for high-probability trade setups. Spotting such opportunities demands patience and an advanced analysis of the price charts.
For crypto trading, traders can opt for two options to look for such trade setups: swing trading and intraday. For both methods, traders can implement the following strategies.
Check out also: Trend Trading Strategy: Trend Confirmation Techniques!
Seizing Confluences
Confluency is an analysis concept that strives for multiple factors that could correlate and push the price sustainably. A simple example of this can be a chart pattern alongside a technical indicator signal occurring at the same time.
Let's point out advanced confluencies for trend trading such as the following:
- Moving averages, candle patterns, and oscillators: Traders can look for an engulfing candle formation around moving averages when they cross each other in favor of the prevailing price direction. An oscillator like the RSI could also indicate an overbought or oversold condition.
- Diverngeces, supply-demand, and chart patterns: Chart patterns like double tops or double bottom can also be a divergence signal in the RSI. When this scenario takes action close to supply and demand zones, traders can spot a reliable confluence suggestion for a trend reversal opportunity.
Detecting Key Levels
As the price moves forward in a trend, it will form swing highs and lows which can represent key levels for the price to react significantly in the future.
One way to spot these levels is by employing Fibonacci retracements with trend lines.
For example: retracements toward the 0.618 level coinciding with a point on the trendline can signal the potential continuation of the trend.
Learn more on how to identify trends in the crypto market here!
Conclusion: The Serious Strategy and Managing Trends
Up to this point, traders have three techniques for implementing a broader strategy attending to different scenarios. Such a strategy will contemplate multiple options to enter and manage a trend. Which options and how to use them? Take the following notes:
- Fibonacci retracements can signal an entry point to enter a trend or be a suggestion to remain on trade as long as possible.
- Traders can use confluences to detect opportunities to add more to a position or to close a trade. If the confluency occurs in favor of the prevailing direction, traders can add. If the confluency signals a trend reversal, traders can close.
- Traders can use confluences and retracements together to spot high-probability setups.
