Trend Based Investing

Investing Strategies I Professional Investing

Trend based investing system uses the benefit of trend to make profitable investing. This method is quite effective and also works great in general risk management.

Learning Tip

Trend based investing works great with momentum stocks. In long term generally whole market is in bull run always. So, finding those stocks which have bullish trend in long run gives great opportunity to make profitable investments.


Trend Analysis

Trend Analysis focuses on three timeframes – short-term (days to weeks), intermediate-term (weeks to months) or long-term (months to years).

These are broad definitions and can be shifted down into shorter timeframes (i.e. short-term could be hours to days), but it is important to always be aware of the trend in three consecutive timeframes because they are interrelated, and actions must consider all three. 

The longer-term trend is the dominant and most important trend, but the shorter-term trends can be where long-term trend changes can first be detected. In other words, the longer-term trend determines the strategic stance, but the shorter-term is where tactical moves are made.

Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies.

Steps to Apply

Investing Using Trend

To use trend analysis for real investing, simply you have to check long term trend of various stocks. Once, you get few stocks which are bullish in long term trend then you can select them for investing while avoid all others.

Apply below steps on each stock to use trend analysis for investing:

Open the chart of each stock and apply this method. Use 21 period EMA line on Monthly timeframe chart for long term analysis.

Bullish Stock: If stock price is above 21 period EMA line in monthly chart.

Bearish Stock: If stock price is below 21 period EMA line in monthly chart.

Entry: Once you have completed long term analysis now you have few bullish stocks. To invest in these stocks for long term simply buy these stocks near the Monthly EMA line stock price.

Risk Management: Whenever stock price falls below monthly EMA line and closes below in monthly chart, sell your stock holding immediately to save from risk.


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