Trending markets represent some of the best conditions to get involved, due to several important factors. Professional traders are developing methods to take advantage of them; this article will help explain the concept and help you get started with trend analysis in your own trading.
Key benefits of a trending market
Price directional bias is one of the key benefits of a trending market. This means the price has a clear path and trading in that direction can lead to accurate trading opportunities along the way. On the opposite side of the spectrum, traders should not get involved in an asset that lacks direction and posts choppy price action developments.
Secondly, in an established trend, pullbacks will very often occur and the dominant market participants will rejoin when the price reaches key support or resistance area. Technical analysis is more efficient when there is an established trend due to a major imbalance in the order flow (buyers or sellers hold the upper hand).
Lastly, a trend can provide major benefits in terms of risk management. Traders can place tighter stop loss and aim for larger take profits, resulting in a better risk/reward ratio. This has massive implications considering one can retain profitability in the long run, even if losing periods will occur from time to time.
How to spot a trend
Spotting a trend is now convenient for anybody, due to the abundance of tools available, in some cases for free. TradingView provides a variety of technical analysis solutions traders can use to understand price action. Drawing tools, popular or customized price indicators, as well as other features, are available when using this solution.
Major brokerage houses have been increasingly integrating with TradingView and one of the latest brands to do it is the easyMarkets. After releasing a BTC-denominated account for customers recently, the broker continues to innovate and now its traders can log into their account at TradingView to benefit from all the resources available there.
Meanwhile, TradingView’s social trading elment allows traders to share trades, strategies, and ideas with other traders, while also see what experienced traders believe about various assets. Thanks to deep market insights, they can access analysis and real-time web-based charts.
Why professionals look after trending markets?
Trends are emerging on both sides of the markets, and the occasional stock market selloff has shown there is downside potential even after a massive run on the upside. Professionals like to get involved in such conditions because prices are moving impulsively in a clear direction, enabling them to place highly accurate trades, if they manage to spot critical support or resistance areas. That is what all traders just getting started should learn, regardless if they want to trade crypto or any other asset class.