When Market is either Bullish (upwards) or Bearish (downwards) then the market is considered to be trending - the only time Market is NOT trending is when it is sideways also called as ranging market.
Trending market presents many opportunities for the trader.
How to enter a Trending Market: Trades (buy orders) are placed ABOVE the last know resistance with tight stops below the resistance line - so when the market breaks the resistance and "takes off" - the trader get to FOLLOW THE TREND.
Exiting the position is one of the toughest decisions for any trader - in trending market - so here are three ways you can exit - the third being the combination of both 1 & 2.
- if the market is making new highs and breaking records - or atleast much further away from the next know resistance - the ideal exit would be "TRAILING-STOP" - you let the market decide when to take you out.
- Alternatively, you can also use "LIMIT-STOP" - typically few pips below the next known resistance - however, if the market does NOT have momentum and turns around before its hits your limit - you will see your profit diminish and the trade might even turn into a LOSS -
- so, ideally INTEGRATE BOTH - add a limit-stop AND use trailing-stop - its a win-win situation.
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