I am going to show you how to ride the wave today… no not an ocean wave.

I’m talking about trend trading…

… you’ve heard it before: The Trend is Your Friend

But what’s it mean?!

Think about a car in motion… even after you let off the gas, it is still moving quite fast…

So fast you actually need breaks to slow it down in a safe amount of time.

Would you want to get in front of that, trying to go the other way?

Of course not… if you are going the opposite way, watch out… however if you are going the same way… jump on and get a free ride…

This is the same in a stock that is trending… whichever way.

When the stock is in an uptrend it tends to continue going up… it takes breaks to slow it down an ultimately reverse it…

So do you want to try and trade in the opposite direction? Of course not!

If you want to make money trading stocks, trade in the direction of the trend…

But do we just buy and hold? Not exactly.

I have the tools and setups that tell me if a stock is trending, which direction and when and where to buy and sell.

 

The Trend is Your Friend

 

The easiest way to make money in the market is to trade with the trend…

So what is a trend?

Simply, it’s the direction of a stock or market’s price over a specific period… and you will generally see higher highs and higher lows in an uptrend (lower highs and lower lows in a downtrend).

If a stock is trending you can simply look at a chart and see the trend. But to help out visually… it’s always good to draw a trendline on the chart.

Check out the chart for Gamestop (GME) below… Just by looking, it’s very clear that GME is trending up….

The price is moving up from the left hand side of the chart to the right hand side… that simple to see.

Now to help with analysis, I will show you how to draw the trendline… so you can see it more clearly.

Drawing a trendline  Going from the left to right… Start at the lowest low and draw a straight line under the lows trying to hit the major higher lows. This is an uptrend… as shown in the chart below.

 

 

That was easy right?

You can do this on any chart and now you have a good visual of the trend.

As you can see.. GME is trending up…

Now how do you make money trading with the trend?

When looking to trade, you first want to identify the trend… which we accomplished by drawing the trendline in the previous chart, where we identified an uptrend in GME.

Where an uptrend is marked by an overall increase in price, we all know a stock isn’t just going to move straight up.

It is going to stall out, pullback, go up, create some support and resistance levels, move around those some, etc.

As frustrating as that ends up being…

That is where we make our money trading with the trend.

You see a lot of people get bounced around on pullbacks but we have the tools and knowledge to make the right decisions to profit…

Let’s look at a basic entry pattern on a trend trade…

Look at the chart below.

Each previous higher high is marked with the green line and higher lows are marked with blue horizontal lines…

After making a higher high, the stock pulls back and as long as the new low is higher than the previous low… you would be looking to buy the stock as it breaks above the last high…

There are multiple trades in a trend as you can see the little blue swings up every time it breaks the previous high…

 

 

There you have the basics of a potential trend trade, buying each time it breaks a previous higher high…

But at the same time… if you are serious about trading, it is always advised to use a clear and proven system that uses more than just a simple breakout…

Here is how I mix other technicals with the trend

In the GME chart below… I marked some of the technicals I was looking at to make a trade in this stock…

First thing you will notice is that before the uptrend we were looking at earlier… it was previously in a downtrend.

After which it made one of my favorite patterns, the Rounded Bottom Breakout (RBB).

On the chart, I point out where the 8 EMA crosses the 20 SMA and both moving averages begin to turn up…

This trade sets up nicely as the stock price closes above the 50 SMA just before the price breaks above the previous higher high… buying on the breakout.

 

 

By pairing my other indicators, patterns, and technicals with my knowledge of trends… we have the opportunity to enter in the beginning stages of the uptrends.

Giving us more profit potential as well as less risk overall…

Now that we are in on the breakout… how do we manage this for profits?

Take a look at the little blue ovals in the chart… I circled these areas to show that each time the price pulled back to the 20 SMA it bounced back up to resume the trend.

The 20 SMA is showing good support and therefore gives us a great place to trail a stop

And the all important when to take profits…

If you look at the last time the price bounced off the 20 SMA… this was the first time it showed some weakness with a tiny break below before resuming…

It still made another higher high after that, continuing the uptrend… however, you can also see that volume is trailing off…

An early sign of buying demand drying up is when a stock is going up while volume is trending down…

It might not be over, but this is a good time to lock in some profits and tighten your stops

So as you can see… without a doubt, the trend is your friend…

But it’s also important to use a strategy that gives you the specifics for when to get in and out and how to identify your trades etc…

If you want to learn more about how I spotted GME and how my RBB trade works… I teach it all in my live trading chat room…

I also send out a daily watch list showing the stocks forming RBB setups as well as the other setups I use…

And in my daily trading room we talk about the setups, point things out to each other, and walk through every trade I take, so everyone is on the same page.

 

Join Me In My Trading Room