Trading Momentum

Trend Following: An Introductory Guide to Low Risk/High-Return Strategies; Stocks, ETF, Futures, And Forex Markets

Casey Boon

• Publisher: PublishDrive
• ISBN:
  9781775131410
• Topic: Business
• Subtopic: Wealth Management
• Index: Business

Score Profits without Feeling Overwhelmed or Overworked.

Set Your Trades in Only 30 minutes per day!

What if a few new trading techniques could have you on vacation with your family at your favourite resort…..

Imagine converting your profits into a car payment or a mortgage payment.

University Educated, and 5 times author, Casey Boon presents her information using a direct approach, weeding out any extraneous fluff. She tells it like it is.

In this book you will learn:

• That trading does NOT require any secret formulas.
• How you can be making profits sooner than you think.
• That the successful traders on Wall St. use these techniques too.
• How to cut your screen time down drastically.
• How to trade without using real money.
• How to conquer leaving money on the table.
• How to make trades and sleep well at night.

Buy this book NOW and claim your profits without feeling overwhelmed!

Pick up your copy by clicking the BUY NOW button at the top of this page.

Introduction

Congratulations on downloading the eBook, Trade Momentum: Trend Following: An Introductory Guide to Low-Risk/High-Return Strategies; Stocks, ETF, Futures, and Forex Markets! Over the next few chapters, you will find a wealth of information that will be helpful as you navigate the world of financial trading and the different trading styles and strategies used in this sphere.

Financial trading is an exciting way to make money and become part of the global financial market. Trading does require much of your daily commitment and active participation, as well as a lot of research, trial and error, and reassessment of methods and strategies in place. As opposed to the more traditional investment practices of buying and holding, trading looks at various market trends, price trajectories, and rising and falling forecasts in an attempt to make profits.

Whether you are getting involved in trading as a full-time or part-time enterprise, it is important to view this endeavor as a business which would require different strategies and methods for maximum earning potential. You should have a clear, measurable business plan with both short-term and long-term goals, a capital amount for getting the enterprise started, and other details essential to the setup and structure of the business.

Trading also requires a comprehensive plan which defines details such as what assets, currencies, or commodities you will be trading, and how you will choose to trade in the markets. Trading plans have to be both concise and measurable, with everything laid out clearly so any consultant or associate can take a look at it and offer expert advice.

Trading plans need to be evaluated from time to time, with research into their effectivity and historical data. Different methods must be tested in the markets over time, compared to each other, and any necessary changes implemented in order to get the maximum results. Some strategies are geared at short-term results, while others are aimed at long-term yields and would require more patience and consistency.

When figuring out your trading plan, one of your most important steps would be assessing and learning the different trading styles and figuring out which one works best for your personality, abilities, schedule, and market. One of the more popular trading styles is known as scalp trading, which refers to very constant buying and selling during the trading session. Scalp trading involves looking at price movements within the day with the intention of building profits through small, frequent gains. Scalp trading moves very quickly, with stops and profit targets managing positions within seconds and minutes. Dozens of trades may be placed within a session when utilizing scalp trading, so this strategy requires a lot of attention and precision.

What makes scalp trading quite popular is the lower risk exposure involved, and the higher number of trading opportunities that may be present to the trader regardless of capital or experience. With the shorter periods of time needed to hold a position, there is less chance for reversals to the trader’s position, and a higher strike rate is also achievable. The downside, however, is that not all trading platforms allow scalp trading, and with the 1:1 risk to reward, one significant trade loss can eliminate any gains already made.

Another trading style is day trading, which has a more moderate pace compared to scalp trading. In day trading, positions are entered and exited within the same trading day, and no positions are held overnight. All trades are closed by the end of the trading session using time exit, stop loss, or a profit target. Day trading makes use of technical data analysis to determine price fluctuations within the same day, as well as price chart intervals. Positions may be held for a few hours at a time, so just like scalp trading, day trading also requires constant attention and is essentially a full-time enterprise.

Day trading may have a less frenetic pace than scalp trading, but it still requires patience and stability on the part of the trader, especially when losses inevitably must be taken during the day’s trading. Michael Sincere, author of Start Day Trading Now (Adams Media, 2011), Understanding Options (McGraw-Hill, 2006), All About Market Indicators (McGraw-Hill, 2010), and Understanding Stocks (McGraw-Hill, 2003), writes for MarketWatch.com , "Although many traders can handle winners, controlling losing stocks can be difficult. Many rookies panic at the first hint of losses and end up making a series of impulsive trades that cost them money. If you’re day trading, you must be willing to accept some losses. The key is to know in advance what you’ll do if you’re confronted with losses."

He adds, "Although anyone can learn to day trade, few have the discipline to make consistent profits. What trips up many people are their emotions, which is why it’s so important to create a set of flexible rules. Your goal: follow the rules to help keep you on the right side of any trade."

In comparison to the intraday characteristics of scalp trading and day trading, swing trading involves holding positions for a few days or weeks at a time, attempting to capture short-term market moves and gains. Swing trading utilizes technical data analysis and price action to identify trade entry and exit points regardless of other fundamental considerations. In swing trading, the trade is exited when a previously determined profit target has already been reached, or when the trade either moves in the wrong direction or reaches a given period.

Swing trading may be a better option for traders who want to get involved in the financial markets but do not have the time to monitor their trading positions throughout the day. This is in contrast to day trading where all positions are exited when the trading session expires. As Investopedia explains, "The distinction between swing trading and day trading is the holding position time. Swing trading involves at least an overnight hold, whereas day trading closes out positions before the market close. Day trading positions are segmented to a single day only. Swing trading involves holding for several days to weeks. By holding overnight, the swing trader incurs the unpredictability of overnight risk resulting in gaps up or down against the position. By undertaking the overnight risk, swing trades are usually done with a smaller position size compared to day trading, which utilizes larger position sizes usually involving leverage through day trading margin."

Another trading strategy employed is technical trading, where charts and graphs analyzing market data are routinely scrutinized and monitored. Any movements in price or trends, as well as signals of convergence or divergence, are used as barometers for buying or selling. Technical trading requires a lot of market knowledge and an understanding of asset trends and price movements, so it also requires a higher level of commitment from the trader.

Many traders utilize what is commonly referred to as fundamental trading, which sticks to the basics by analyzing corporate events and other factors which affect the value of stocks or assets. For instance, in fundamental trading, the trader watches for earnings reports, reorganizations, acquisitions, stock splits, and other major events which may result in higher or lower prices or expected earnings, then jumping on these events to either buy or sell.

Fundamental trading relies on more than just the stock market value of a company, as explained by Euroinvestor.com: "For a fundamental analyst, the market price of a stock tends to move towards its 'intrinsic value', which is the 'true value' of a company as calculated by its fundamentals. If the market value does not match the true value of the company, there is an investment opportunity. An example of this is that if the current market price of a stock is lower than the intrinsic price, the investor should purchase the stock because he expects the stock price to rise and move towards its true value. Alternatively, if the current market price is above the intrinsic price, the stock is considered overbought, and the investor sells the stock because he knows that the stock price will fall and move closer to its intrinsic value."

Technical and fundamental trading strategies are often combined in what is known as position trading. Position trading is characterized by a longer time frame stretching from weeks to years, with short-term fluctuations or price dips bypassed in favor of long-term gains and market trends. Position trading looks at data from charts and graphs as well as other information sources over extended periods of time in the decision-making process.

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