The market, like the ocean, has its waves. These waves represent trends – the general direction in which an asset’s price is moving. Beginning traders often underestimate the power of these trends, either being sucked into the fear of missing out (FOMO) or panicking in the face of temporary setbacks. You you really want to trade with the trend.
If you have followed my trading blog for any length of time, you have read or heard this at some point in time. But this is one point that really needs to get driven into your thick skull, I am talking to myself here as well. Beginning and even intermediate traders can easily get sucked into pull backs, only to miss out on some greater pumps, because they are trying to trade against the trend.
Why Follow the Trend? Stability in Uncertainty
Going back to the ocean analogy, trading against the trend is like trying to swimming against the current. It’s exhausting, risky, and often very counterproductive. Instead of fighting the market forces, aligning your trades with the prevailing trend can offer a bit of stability in the midst of uncertainty. Trends, whether upward or downward, provide a certain level of predictability that can be leveraged for more informed decision-making.
Why do you think I built multiple trend indicators into the Logical Trading Indicator? It’s because I want to make sure that I am trading with the trend. This is also why I am a fan of the Heiken Ashi candles. They really help see the trend and smoothen out the price action where it’s not so choppy and stressful to look at.
Patience Pays: Waiting for the Right Wave
Success in trading is not about catching every wave but rather about catching the right ones. Patience is a virtue that cannot be overstated. By patiently waiting for a trend to reveal itself, you position yourself to ride a more substantial and sustainable wave, increasing the likelihood of a profitable outcome.
You really don’t want to be trading during times of market consolidation. There may be some ups and downs, but those aren’t the ones that are going to take you on the big rides. You need to wait for those real good setups to catch those big gains.
My custom indicator has a momentum indicator that is built right into the candlesticks. If the market is in consolidation, it turns the candles to white, or whatever neutral color you chose in the settings. This helps keep you out of stagnant trades.
Risk Management: Surfing Safely
Trading with the trend is not a guaranteed recipe for success, but it does provide a risk management strategy. The trend, in essence, becomes your ally, offering a buffer against sudden market reversals. Effective risk management is crucial for preserving your capital and ensuring that you live to trade another day.
If you are trading with the trend, it’s less likely for you to get stopped out of your trades, unless you are trading into supply or demand zones. This is where you can get a bit messed up if you are not careful. If a trend has been going for a bit, you might want to wait for things to correct, essentially, you want to wait for the boat to come back instead of jumping in after it. There will always be another opportunity to take a ride.
The Psychology of Trends: Riding the Emotional Wave
Emotions play a significant role in trading, and novice traders are particularly susceptible to impulsive decisions driven by fear or greed, it’s happens to everyone at some point, so don’t feel bad if you throw a couple of trades willy nilly because you had a gut feeling. Trading with the trend helps mitigate these emotional swings. Instead of making decisions based on short-term market fluctuations, you can adopt a more disciplined approach guided by the prevailing trend.
Conclusion: Embrace the Flow
Aligning yourself with the prevailing trend is not just a strategy; it’s a mindset. It’s about understanding the natural flow of the market, respecting its patterns, and adapting your approach accordingly. So, as you embark on your trading journey, remember: ride the trend, embrace the flow, and let the market waves carry you to consistent profits.
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Many of my cryptocurrency related articles can also be found on my crypto research site, Coin Logic.
My main trading education related articles can be found on the Logical Trading Academy Blog page.
The information in this trade journal is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.
This post was originally posted on the Logical Trading community on InLeo.io