What Is Trend Trading?

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There are thousands if not millions options or ways to invest your money. You can buy stocks, mutual funds, bonds, gold, foreign currencies etc. etc. The inconvenient truth about all these choices is that at any given time you probably don’t have the best investment out there. One month gold will be doing great, then bonds, then stocks. Most people chase these investments and thus end up losing money.

Instead of chasing investments you need a system. But not just any system you need an investment system that makes you money month after month, year after year. This is where trend trading comes in. Trend trading is a system that helps you find profitable investments before other people know about them, not after. So you can stop chasing investment opportunities and start seizing them.

Now, trend trading is actually a fairly vague concept because it can be applied in so many different markets. The two most common are the stock market and the FOREX or foreign exchange market. So, let me explain a little about these two different markets and why I don’t think they are the best for trend trading.

First off, I am sure you are already familiar with the stock market. In fact, if you are reading this you probably already have some money invested in it but want a way to get higher returns. Trend trading can be used to help you trade stocks in any stock market. At its core, it uses technical analysis to find stocks that are either way above or below their long term moving average (usually either 50 day or 200 day moving averages are used). Then depending on the system you use it will advise where to go from there. But what if the stock market is flat?

Well, you could look at getting into the FOREX. Not many people know this, but the FOREX is by far the world’s largest market with almost $4 trillion (yes with a T) traded daily. Again trend analysis can be used to look at long term moving averages to help you figure out what to do. However, given the size of the market and its extreme liquidity it can be a bit too much for inexperienced investors.

Wouldn’t it be nice if there was some way of getting the best of both worlds from both stock and FOREX trend trading? Well, in fact there is, and it is called ETF trend trading. If you don’t already know the term ETF stands for exchange traded fund. They work, very similar to stocks but offer a far wider range of investment options.

Some of these options include stock indexes like the NASDAQ or Dow, stock sectors like healthcare or utilities, commodities like oil and gold and even foreign currencies like the British pound or Japanese Yen. This makes ETFs the most diverse of all investment vehicles and why I think it makes the most sense to apply trend trading here. Better yet, if you already have a brokerage account to trade stocks you can trade ETFs.

To find out more about ETF trend trading I recommend you have a look at the following free newsletter and course. It explains everything you need to know in great detail and doesn’t cost you anything more than your e-mail address.

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