What is trend trading?

There are two types of trend traders. The most common is the uptrend trader. This type of trading is based on finding strong up trending stocks making higher highs and higher lows. When the stock pulls back and makes a lower low it is said to be a buying signal. Successful traders will stay in a trend trade until the stock pulls back significantly or starts to make lower highs and lower lows. It is also normal for traders to have a stop loss order so it the stock goes down to a certain level it will sell the stock automatically.

The other type of trend trader is a down trend trader. These traders are not as common, but still exist. This type of trend trading is based on finding weak stocks that are making lower lows and lower highs. When the stock makes a lower high it is said to be a sell or short signal.

Like up trending stocks it is normally a good idea to ride the stock until the trend reverses or has a big move in the opposite direction that stops you out.

It is very important for this type of trading to know how strong the trend of a given stock is. There are various different ways to determine this. The adx indicator is one of the most popular ways to do that.