Chapter 4

Understanding the Advantages and Disadvantages of Trend Trading

In This Chapter

arrow Seeing how trend trading can be profitable

arrow Avoiding the dangers of trend trading

Trend trading is a two-sided coin. It’s definitely a valid approach to trading that’s been used by professional traders throughout the history of financial trading. However, although it can be traded profitably, it has some inherent shortcomings.

This chapter explores some of the advantages and disadvantages of trend trading. Being armed with the knowledge of trend trading’s strengths and weaknesses is the best way to become successful.

Discovering the Advantages of Trading with the Trend

Trading with the trend has several advantages that are important to know so you can capitalize on the strengths of your trading approach. The most basic advantage is this: By trading with the trend, you’re trading in the direction of the market. And because trading in the direction of the market just makes sense, trend trading has an inherent rationale.

The following sections explore specific benefits that come with trading with the trend.

Getting big, winning trades

One of the most important advantages of trading in the direction of the trend is that when done correctly, your winning trades are much bigger than your losing ...

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