Trade with the Long-Term Primary Trend for Low-Risk High-Reward Profits

What is Trend Investing and Trading?

Trend investing trading is a strategy that trys to obtain gains through the analysis of an asset’s price momentum either up or down. The trend investor trader enters into a long position when a stock is trending upward with successively higher highs. Vice versa, a short position is taken when the stock is in a down trend with successively lower highs.

This investing trading strategy assumes that the present direction of the stock will continue into the future. It can be used by short, intermediate, or long-term investors traders. Regardless of their chosen time frame, investors traders will remain in their position until they believe the trend has reversed. Take note that reversals may occur at different times for each time frame.

A common cliche in trend investing and trading is The Trend is Your Friend. It means the primary trend is where the current overall strength is until it reverses at some point and time. Trading with strength and the primary trend is a generally a lower risk higher reward way of investing and trading. Investing and trading with the counter trend to the main trend is generally a more higher risk lower reward way to invest and trade in the markets. Try to invest and trade where the current strength is, the primary trend. If you are investing and trading with the counter trend, keep your stop-loss tight.

Moving Averages for Stocks in Uptrends by Zacks Investment Research

Moving averages would fall under the heading of ‘technical analysis’. But you don’t have to be a technician to use them. They’re pretty plain and simple and very straight forward.

With the market still in a larger uptrend, there’s no shortage of stocks trading above their moving averages. But with the recent pullback, some individual stocks saw their uptrends come to an abrupt halt.

And if the market churns around in this area for any meaningful period of time, you’re likely to spot many more individual stocks breaking their trend as well.

So let’s take this opportunity to look at some key moving average set-ups and what they mean.

Long-Term and Short-Term Moving Averages

Short-term moving averages help gauge the short term direction of the market while longer-term moving averages take a bigger picture view.

The 200-day moving average would be a longer-term moving average.

In general, if a stock breaks the 200-day moving average on its way down, that’s generally thought to be bearish, and the longer-term trend could be turning lower.

Tons of stocks did this in 2008.

The 200-day moving average can also act as support. If a stock comes down, but stops at the major moving average and then starts moving higher from there, it can act as a firm underpinning of support for the stock. Kind of like a moving trendline.

And just like breaking the 200-day moving average on the way down can often times signal a downtrend, an upside breakout thru the 200-day moving average can often times signal the beginning of a new uptrend for a stock.

The 50-day moving average can be quite useful as well. It’s more of an intermediate snapshot of the price trend and is more sensitive than the longer-term 200-day.

A rising moving average with the price trading above it is bullish, while a descending moving average with the price trading below it is bearish.

And even shorter term signals can be seen with the 10- and 20-day moving averages.

Moving average crossovers can also be valuable. When the quicker moving average (10-day for example) is above the slower moving average (20-day), this is thought to be bullish. Likewise, when the shorter-term is trading below the longer-term moving average, this is thought to be bearish.

In the past there have been plenty of stocks that fell below their shorter-term moving averages and even their longer-term moving averages.

But there are still plenty of stocks moving up, with their uptrends intact. And finding these kinds of stocks is easy to do with a stock screener.

Trend Trading Screen Parameters

The screen I’m running today looks for stocks trading above their short-term and longer-term moving averages:

Current Price greater than 10-day moving average (short-term)

Current Price greater than 20-day moving average (short-term)

Current Price greater than 50-day moving average (medium-term)

Current Price greater than 200-day moving average (long-term)

Click the Links Below to Review Trend Trading Advisories