Excerpt for Trading Momentum: An Introductory Guide To Low-Risk/High-Return Strategies; Stocks, ETF, Futures, And Forex Markets by , available in its entirety at Smashwords

TRADE MOMENTUM



Trend Following: An Introductory Guide To Low-Risk/High-Return Strategies; Stocks, ETF, Futures, And Forex Markets

By

Casey Boon



Table of Contents



Introduction

Chapter One:  What Is Momentum Investing?

Chapter Two:  What Is Trend Following?

Chapter Three:  Maximizing Methods For Trading

Chapter Four:  Trading Tips For The Beginner

Chapter Five:  Choosing The Right Market

Chapter Six:  Money Management Principles In Trading

Final Words



Copyright 2017 -By Casey Boon, Smashwords Edition, All rights reserved. It is not legal to reproduce, duplicate, or transmit any part of this document in either electronic means or printed format. Recording of this publication is strictly prohibited It is not legal to reproduce, duplicate, or transmit any part of this document in either electronic means or printed format. Recording of this publication is strictly prohibited. The following eBook is reproduced below with the goal of providing information that is as accurate and reliable as possible. Regardless, purchasing this eBook is interpreted as consent to the fact that both the publisher and the author of this book are in no way experts on the topics discussed within and that any recommendations or suggestions that are made herein are for entertainment purposes only. Professionals should be consulted as needed prior to undertaking any of the action endorsed herein. This declaration is deemed fair and valid by both the American Bar Association and the Committee of Publishers Association and is legally binding throughout the United States. Furthermore, the transmission, duplication or reproduction of any of the following work including specific information will be considered an illegal act irrespective of if it is done electronically or in print. This extends to creating a secondary or tertiary copy of the work or a recorded copy and is only allowed with express written consent from the Publisher. All additional right reserved. The information in the following pages is broadly considered to be a truthful and accurate account of facts and as such any inattention, use or misuse of the information in question by the reader will render any resulting actions solely under their purview. There are no scenarios in which the publisher or the original author of this work can be in any fashion deemed liable. for any hardship or damages that may befall them after undertaking information described herein. Additionally, the information in the following pages is intended only for informational purposes and should thus be thought of as universal. As befitting its nature, it is presented without assurance regarding its prolonged validity or interim quality. Trademarks that are mentioned are done without written consent and can in no way be considered an endorsement from the trademark holder

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Introduction



Congratulations on downloading the eBook, Trade Momentum: Trend Following: An Introductory Guide To Low-Risk/High-Return Strategies; Stocks, ETF, Futures, And Forex Markets! Over the next few chapters, you will find a wealth of information that will be helpful as you navigate the world of financial trading and the different trading styles and strategies used in this sphere. 


Financial trading is an exciting way to make money and become part of the global financial market. Trading does require much of your daily commitment and active participation, as well as a lot of research, trial and error, and reassessment of methods and strategies in place. As opposed to the more traditional investment practices of buying and holding, trading looks at various market trends, price trajectories, and rising and falling forecasts in an attempt to make profits. 


Whether you are getting involved in trading as a full-time or part-time enterprise, it is important to view this endeavor as a business which would require different strategies and methods for maximum earning potential. You should have a clear, measurable business plan with both short-term and long-term goals, a capital amount for getting the enterprise started, and other details essential to the setup and structure of the business. 


Trading also requires a comprehensive plan which defines details such as what assets, currencies, or commodities you will be trading, and how you will choose to trade in the markets. Trading plans have to be both concise and measurable, with everything laid out clearly so any consultant or associate can take a look at it and offer expert advice.

 

Trading plans need to be evaluated from time to time, with research into their effectivity and historical data. Different methods must be tested in the markets over time, compared to each other, and any necessary changes implemented in order to get the maximum results. Some strategies are geared at short-term results, while others are aimed at long-term yields and would require more patience and consistency. 


When figuring out your trading plan, one of your most important steps would be assessing and learning the different trading styles and figuring out which one works best for your personality, abilities, schedule, and market. One of the more popular trading styles is known as scalp trading, which refers to very constant buying and selling during the trading session. Scalp trading involves looking at price movements within the day with the intention of building profits through small, frequent gains. Scalp trading moves very quickly, with stops and profit targets managing positions within seconds and minutes. Dozens of trades may be placed within a session when utilizing scalp trading, so this strategy requires a lot of attention and precision. 


What makes scalp trading quite popular is the lower risk exposure involved, and the higher number of trading opportunities that may be present to the trader regardless of capital or experience. With the shorter periods of time needed to hold a position, there is less chance for reversals to the trader’s position, and a higher strike rate is also achievable. The downside, however, is that not all trading platforms allow scalp trading, and with the 1:1 risk to reward, one significant trade loss can eliminate any gains already made.


Another trading style is day trading, which has a more moderate pace compared to scalp trading. In day trading, positions are entered and exited within the same trading day, and no positions are held overnight. All trades are closed by the end of the trading session using time exit, stop loss, or a profit target. Day trading makes use of technical data analysis to determine price fluctuations within the same day, as well as price chart intervals. Positions may be held for a few hours at a time, so just like scalp trading, day trading also requires constant attention and is essentially a full-time enterprise. 


Day trading may have a less frenetic pace than scalp trading, but it still requires patience and stability on the part of the trader, especially when losses inevitably must be taken during the day’s trading. Michael Sincere, author of Start Day Trading Now (Adams Media, 2011), Understanding Options (McGraw-Hill, 2006), All About Market Indicators (McGraw-Hill, 2010), and Understanding Stocks (McGraw-Hill, 2003), writes for MarketWatch.com, "Although many traders can handle winners, controlling losing stocks can be difficult. Many rookies panic at the first hint of losses and end up making a series of impulsive trades that cost them money. If you’re day trading, you must be willing to accept some losses. The key is to know in advance what you’ll do if you’re confronted with losses."


He adds, "Although anyone can learn to day trade, few have the discipline to make consistent profits. What trips up many people are their emotions, which is why it’s so important to create a set of flexible rules. Your goal: follow the rules to help keep you on the right side of any trade."


In comparison to the intraday characteristics of scalp trading and day trading, swing trading involves holding positions for a few days or weeks at a time, attempting to capture short-term market moves and gains. Swing trading utilizes technical data analysis and price action to identify trade entry and exit points regardless of other fundamental considerations. In swing trading, the trade is exited when a previously determined profit target has already been reached, or when the trade either moves in the wrong direction or reaches a given period. 


Swing trading may be a better option for traders who want to get involved in the financial markets but do not have the time to monitor their trading positions throughout the day. This is in contrast to day trading where all positions are exited when the trading session expires. As Investopedia explains, "The distinction between swing trading and day trading is the holding position time. Swing trading involves at least an overnight hold, whereas day trading closes out positions before the market close. Day trading positions are segmented to a single day only. Swing trading involves holding for several days to weeks. By holding overnight, the swing trader incurs the unpredictability of overnight risk resulting in gaps up or down against the position. By undertaking the overnight risk, swing trades are usually done with a smaller position size compared to day trading, which utilizes larger position sizes usually involving leverage through day trading margin."


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