What Is Trend & How Traders Can Make A Profit By Riding Trend?

Stocks markets have been there for a long time and have always had a pivotal role in a country's development. Every day billions of dollars are exchanged continuously between traders and almost everyone is in a race to capitalize on the movement that stocks have daily.

With over hundreds or possibly thousands of trading strategies out there, no trader in this world would agree that finding a trend, understanding the bottoming out of the charts and following the momentum isn't the best profitable trade possible. But the biggest issue that every trader faces is that identifying and knowing the trend during the trend is the most important thing. How to identify trends? How to know that you are in a trend right now and how to capitalize on the trends when happening? All these questions will be discussed here today, so continue reading if you too want to be a good trend identifier.

What is a trend?

Trends are those market movements where the price of a particular financial instrument goes in a single direction with great momentum. Now, as we all know, prices never go in a single direction. It always goes in a much-consolidated way with an occasional breakout here and there based on the supply and demand zones. And these are the same movements that hide trends from being capitalized on during the live markets. So, if you see a price going straight up or down for a significant period of %, then understand that you are currently in the middle of a trend.

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How to identify trends?

Trends in markets are of 3 types. It can be either:-

• An uptrend
• A downtrend
• Sideways or consolidating trend

Big money is generated in the first two compared to the third one. And there are many ways you can identify these trends. Below are some of the ways of how you can capitalize on these moves:-

• Identify reversing patterns on supports and resistances. Patterns like a double bottom, double top, falling wedge, rising wedge rising triangle, falling triangle, etc., at support or resistances, appropriately signify a significant pressure from either the sellers on resistances and buyers on supports. Knowledge of patterns is a must and you must know how to identify them.
• Use indicators that show the level of momentum in a particular movement. Indicators like RSI, MACD, ADX are some of the most popular indicators used by traders to identify momentum in a particular trend. Trade in an instrument when you see the momentum and price movement both are showing similar results. These would significantly increase your chances of profiting from a trade.

How to capitalize on the massive moves?

Always do your due diligence before entering a trade. This is because no trading strategy would involve only robotic rules. Human emotions should be a part of a trading strategy. Again, please remember human emotions should not intervene in a trade, but they should always be a part of a strategy. Make rules which you think are working out for you. Build strategies, paper trades them for a while, or backtest them. And only when you see them succeeding go with it. Also, while backtesting strategies, always remember no strategy in this world would yield a 100% win rate. Have a good RR ratio and try to be as profitable as possible.