The key steps involved in trend trading include:
Identifying trends: The first step in trend trading is to find out the direction of the trend. This can be done by analysing price charts and looking for higher highs and higher lows in an uptrend or lower lows and lower highs in a downtrend. Technical indicators such as moving averages and trend lines can also be used to highlight trends.
Selecting entry and exit points: Once a trend has been identified, the next step is to select entry and exit points. Entry points can be determined using technical indicators such as momentum oscillators and chart patterns.
Managing risk: Risk management is an important aspect of trend trading. Traders can use appropriate position sizing and risk management techniques. Stop-loss orders can be used to limit potential losses. It should be noted that ordinary stop-losses do not protect from slippage, while guaranteed stop losses do, however there is a fee associated with them.