A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits

Trend Analysis as a Risk-Management Process

The explanation of price movement as either efficient or random ignores the most important attribute of the trend: its role as a means of risk management.

By tracking stock trends and defining the differences between swing, secondary, and primary trends, investors may develop methods for managing risk. This is accomplished through carefully timed trades based on trend behavior. Even conservative buy-and-hold traders whose portfolio is treated as permanent are able to utilize trends to time defensive measures to avoid losses. These include closing long equity positions in anticipation of bearish turns in current trends; the purchase of put options to ensure paper profits; variations of dollar cost averaging ...