The main problem for the trend trader is to get on a trend in a safe manner. Spotting a trend and placing the bet seems to be so easy, but there are some obstacles. Three things can happen:
The trend has ended just in the moment or shortly after you entered it. Either it swings out into chaotic fluctuations or it reverses completely.
A pullback occurs, the price goes in the wrong direction, but finally reverses again and brings your position into positive territory.
The trend marches ahead and the trade works from the beginning on.
The first case is all too frequent and the reason for that is the distribution of trend lengths. Shorter trends occur more often than longer ones.
Case two happens also way too often. It has to be this way, otherwise trading would be as easy as falling off a chair. Only a minority can gain constantly in the markets.
That is why case three is rather seldom. We have to deal mostly with the not so fine situations, which is the reason why trend trading is not so easy as it may look. Thinking relaxed about the first two cases leads to the idea of using the stop loss method. Somnambulistically we concluded the right thing for trend trading.
Being stopped out means the trend came to an end, and being still in means you are invested in a trend. This is the simple reasoning that makes stop loss trading so powerful if used with trends.
More specifically, if you get stopped out, chances are that you entered into a case one situation. If you are still in, you may have fetched the third case.
The second case is more problematic. Surviving the pullback without being stopped out requires to enter trends at the right times. One system is to open the position when the market shows some short term strength in the direction of the trade and probabilities are skewed towards the trader’s favor.
Waiting for a restart off a base or more generally for any chart pattern, or waiting for some news, or for an overnight gap of the whole market that often gets quickly recovered are some other entry techniques. Waiting for larger formations like chart patterns comes with the problem that they may never occur or only near the end of a trend.
The grand entry method is to wait for a pullback or whole swing to run out of gas and then go with the backswinging tide. That would be swing trading in a trend par excellence. Helpful could be a swing trading software that generates buy and sell signals automatically. Put in a trend at work, this swing trading robot should yield even better results.
Such a swing analyzer takes the heat out of the hot entry phase, makes the trader’s life a lot easier and who knows, perhaps it even trades better than you. Why?
There is psychology involved. Many traders may do better than trading software, in theory. In reality they often fail miserably or have grossly suboptimal returns. Their trading mind is simply not balanced between greed and fear so that they are not able to neutrally judge a situation. Maybe they can’t stick to their trading system closely enough. Or they act as if they had no system at all…
Clearly no one likes to admit things like these, but why not see trading pragmatically? With this type of emotionless swing trading advisor you could concentrate on finding the right uptrending stocks. There is still plenty of room to work actively on your trading success. Perhaps your efforts are spent better with the superordinated selection of stocks with promising trends?