Understand the Other “Energies” You Need to Trend Trade Profitably

By Barry Burns

Part of Trend Trading For Dummies Cheat Sheet

As good as trend trading is, trend shouldn’t not be the only factor in considering whether or not to take a trade. Other factors must be added to it to provide enough variables to create a probability scenario that puts the odds on your side.

  • Trading in the direction of the trend (the dominant direction of the market) is a great place to start. Determining the direction of the market at any given time is easy. The more important question for a trader is, “Will the market continue in that direction after I enter the market?”

  • Knowing the strength of the trend will help you determine the probability of the market continuing to move in the direction of the trend after you enter your trade. Use an indicator that measures momentum to determine whether the trend is strong or weak before you take a position in the market.

  • Determining the time to enter your trend trade is critical. If you get in too early, the market may experience a steep correction against your position before the trend continues. If you enter too late, the trend may be coming to an end. Use a cycle indicator and wave counts to determine the ideal time to enter the trend.