Singapore, 22 Dec 2021, ZEXPRWIRE, The art of trend trading is a highly subjective form of investing - a broad concept comprising a wide range of trading strategies. Trend traders identify momentum within emerging market opportunities and invest accordingly.
They analyze trends, fundamental factors, economic indicators, sentiment analysis, search engine interest, and other market information to predict equity price movement - short, medium and long term depending on the strategy adopted.
Long-term trend investing is a strategy that investors use to generate returns over a long timer period, typically 5-10 years. Investors aim to identify macro-trends that are emerging as a result of a wide range of societal factors. Some emerging examples of macro-trends may include the metaverse, bitcoin, decentralised organisations, computer vision, humanoid robots, Industry 4.0, autonomous cars - the list goes on.
Trend investing is not a fad - traders develop their own methodologies over time and, as with any trading strategy, some succeed and some fail. Diversification and the long term horizon helps alleviate substantial risk.
While most investors are quick to dismiss the long-term trend trading strategy, we believe that its ability to deliver superior returns, in the long run, can be an incredible source of value for investors. Just think about what the world was like 50 years ago, and imagine what it will be like in our lifetime. We are undergoing a golden age of technological progress.
In this article, we will explore long-term trend trading and explain why long-term trend trading works for investors.
What is long-term trend trading?
Long-term trend trading is a form of market analysis that focuses on identifying the macro trends in equity price movements.
Trend traders can generally be grouped into one of four categories:
1.Trend followers who buy securities when they enter into uptrends and aim to sell them when they start to decline.
2.Momentum traders who use moving averages, moving averages convergence divergence (MACD), or stochastic oscillators to identify entry points for buying and selling securities.
3.Technicians who try to predict the direction of price movements using Bollinger bands, envelope width indicator, or channel breakouts based on technical analysis principles such as mean reversion, support, and resistance levels, momentum trends, cycle patterns, etc.
4.The “buy-and-hold” trend trader. This approach much resembles Berkshire Hathaway’s mindset - "Our Favorite Holding Period Is Forever." - Warren Buffet. If you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes.
There are a lot of options for long-term trend trading, but the one that stands out is investing in compounding global growth. Compounding global growth stems from the idea that humanity’s progress is exponential. It's a trend that has been proven over and over again. Within global market growth, there are pockets of long term trends that will consistently outperform index funds over the foreseeable future. If you believe this to be true, then it makes sense to explore growing trends and, in turn, study the key market players within the sector. An extremely simple concept.
Why Long-term trend trading works for investors?
Long-term trend trading is a long-term investment strategy in which an investor holds on to the same asset for a considerable period of time.
It can be extremely profitable
Traders can hope to generate huge profits over time with the long-term trend trading strategy. The objective of trend trading is identifying equities that are going to grow multiple fold over a long time period. Investors do not have to buy and sell these assets frequently in response or as market conditions change.
Relatively low risk - It provides stability and security
Long-term trend trading usually has a stable price pattern, no matter how the market moves. This type of strategy is also considered to be less risky than short-term trading strategies because it does not require traders to buy or sell immediately in response to moving markets and volatile price fluctuations. Just make sure to pick uptrends!
It is ideal for long-term investors
Because of the stability and security benefits, long-term trend trading is highly recommended for those seeking to invest their money over a period of time. A passive form of investing that requires a lot of patience.
It does not require active trading
Traders do not have access to market data at all times. This means that traders do not have to make quick decisions in response to market movements. Because of this, long-term trend trading is ideal for those seeking this type of investment approach. Active trading rarely proves to exceed average market growth.
It promotes diversification
You have identified an emerging trend? Time to invest in some of the key market players. Given you are aiming for multiple fold growth market growth, we’d expect most companies to follow the same trend. If one underperforms, your diversified investments should significantly outweigh any losses.
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