Trend Trading

"Whether You Win Depends
on How You Do It"

Trend trading to Win is currently a popular phrase with advertisers of trend trading products.

That idea is about as new and surprising as saying that touchdowns are a good way to score at football.

System traders take all the profits from the commodity markets and all of them are trend traders because you just can’t make money any other way than latching on to trends. Pretty well every successful system is a trend trading system – any that aren’t are going to be a problem.

The skills that the successful system traders employ are directed at exploiting trends. You can latch onto a trend but how do you make the best of it? Do you stay with it until it ends? You will probably answer a vigorous “yes” to that – but where is the end of a trend and how do you recognize it?

It is all well and good to say “let the trend be your friend” but how do you make friends with a trend and how do you stay friends with it?

When you get down to this level of questioning, you will find the answers start to become wobbly. You will very likely be told that predicting trends is one big secret you have to get to know. That big secret is easy to know because there is no such thing as a predictive system.

Having got that out of the way, the question arises – how does trend trading work?

The thing to realize is that all trading is trend trading and all systems worth considering will be trying to get into the market when it might be going into a rising or falling trend.

More often than not, the signal from your system will turn out to be a false alarm (whatever system it is). That is just the way it is with commodity trading but that doesn’t matter because you are not looking for a string of small winning trades that are overwhelmed by a few larger losers – you are looking for the exact opposite.

Your system may employ something very simple, like a moving average indicator to signal when the market may be about to go ‘on the move’. Or you may use a price or volatility breakout method to get into a potential trend.

The most important thing is to make the most of the trend, if that is what it turns out to be. It is easy to say this but what does it mean?

You won’t want to get into positions you cannot afford to be in – where you will be very uncomfortable. You will not want to try to stay with trends that have the potential to damage you badly.

Before you begin to trade, you will want to know what you will do and how you will be exiting from the market. In other words you will want to know what will signal the end of the trend as far as you and your trading goals are concerned.

You will want to know that your trading system will manage your trades to ensure that you make the most of the opportunities provided by the market.

All of this is where the winning traders score and where they have applied their expertise to develop the methods and processes they use to system trade the markets.

Trend trading methods and trend trading software are what successful trading is all about but it’s not what you do – it’s the way that you do it that matters. System rules are of secondary importance – it’s the trade management methods that really count.

So don’t be impressed when someone tells you that scoring touchdowns is a good thing to do in football – just ask them how you do that!

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  David Bromley helps
  new and aspiring systems
  traders establish a complete
  trading method to compete
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