Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.
Imagine the market as a bustling red carpet event, where every asset is a celebrity and every trader a paparazzi. Cameras flash, and eyes dart, seeking the hottest stars – the trends. In this fast-paced world, trend trading emerges as a strategy that not only keeps up with the glamour but also reaps the rewards of being in the right place at the right time.
Trend trading, akin to snapping a perfect photo of a celebrity at their peak, involves identifying and riding market trends.
The allure is undeniable: A trend trader follows the momentum of the market, capturing gains as the asset price moves in a consistent direction.
What is trend trading?
Trend trading is a strategy that involves analysing the price momentum of an asset in one direction – either up or down – and making trades based on the perceived continuation of this trend.
This approach capitalises on the idea that “the trend is your friend,” allowing traders to ride the waves of market movements.
Traders use various tools and indicators to identify trends, such as moving averages, trendlines, and momentum indicators like the Relative Strength Index (RSI).
These tools help in pinpointing the start and end of a trend, ensuring traders can enter and exit positions at optimal points.
The tools of the trade
Just like how a paparazzi needs a good camera, a trend trader requires specific tools to spot and follow trends. Here are some key instruments in the arsenal of a trend trader:
Moving averages
Moving averages smooth out price data to help identify the direction of a trend. The two most commonly used types are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).
Traders often use the 50-day and 200-day moving averages to gauge the overall trend.
Trend lines
Drawing trend lines on a chart helps traders visually identify the direction of the trend. An upward trend line is drawn by connecting the successive higher lows, while a downward trend line connects the lower highs.
Yes. YES. Nuff’ said
Technical indicators
Indicators like the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Bollinger Bands provide additional insights into the strength and potential continuation of a trend.
These tools can signal overbought or oversold conditions, helping traders make informed decisions.
Strategies to be successful in trend trading
Trend trading can be implemented through various trading strategies, each with its unique approach to capturing market movements. Here are some popular ones:
Following the trend
This straightforward strategy involves identifying the direction of the trend and entering trades in the same direction.
For instance, if the market is in an uptrend, traders look for buying opportunities. Conversely, in a downtrend, they seek selling opportunities.
Trade the breakout
Breakout traders look for key levels of support and resistance. When the price breaks through these levels, it often signals the beginning of a new trend.
Traders enter positions as soon as the breakout occurs, aiming to capture the momentum of the new trend.
Make your entry during the pullback
In a trending market, prices often retrace or pull back before continuing in the original direction. Pullback traders wait for these retracements and enter positions at more favourable prices.
This strategy aims to capitalise on temporary price corrections within a trend.
Examples of trend trading
Apple (Symbol: AAPL)
The stock price of Apple has exhibited strong trends over the years. During its meteoric rise from 2009 to 2020, trend traders who entered into buy positions of AAPL when they identified an upward trend and held onto them profited significantly.
By following the trend and avoiding the urge to sell during minor pullbacks, these traders maximised their returns.
Euro vs US dollar (Symbol: EURUSD)
The EURUSD currency pair is one of the most traded in the forex market. Its price movements often exhibit clear trends.
For example, during the period of 2017 to 2018, EURUSD experienced a strong uptrend. Trend traders who recognised this upward momentum and entered buy positions profited as the euro strengthened against the dollar.
The pros and cons of trend trading
Here are the reasons why you should use trend as your friend, and what you should be looking out for when you decide to deploy trend trading as your strategy.
Pros
Simplicity: Trend trading is straightforward and easy to understand.
Profit potential: It allows traders to capitalise on significant market movements.
Flexibility: Can be applied to various markets, including stocks, forex and commodities.
Cons
Market Dependency: Relies heavily on the market trending in a clear direction.
Timing: Requires precise timing for entry and exit to maximise profits and minimise losses.
Volatility: Sudden market reversals can lead to significant losses.
Use trends as your friend as you navigate the financial markets
Trend trading, much like the pursuit of a paparazzi for the perfect shot, requires a keen eye, patience, and the ability to act swiftly. By understanding market trends and employing effective strategies, traders can capture the biggest market movements and turn them into profitable opportunities.
As with any trading strategy, continuous learning and adaptation are key to long-term success. Explore 1000+ assets being offered by VT Markets and tart your financial trading journey today!
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.
Affected by international holidays, the trading hours of some VT Markets products will be adjusted. Please check the following link for the affected products:
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.
As part of our commitment to provide the most reliable service to our clients, there will be MT4 server maintenance this weekend.
MT4 Maintenance Hours:
03th of August 2024 (Saturday) 09:00 – 13:00 (GMT+3)
Please note that the following aspects might be affected during the maintenance:
1. The price quote and trading management will be temporarily disabled during the maintenance. You will not be able to open new positions, close open positions, or make any adjustments to the trades.
2. There might be a gap between the original price and the price after maintenance. The gaps between Pending Orders, Stop Loss and Take Profit will be filled at the market price once the maintenance is completed. It is suggested that you manage the account properly.
Please refer to the MT4 software for the specific maintenance completion and marketing opening time.
Thank you for your patience and understanding about this important initiative.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.
The US equity market increased by 3.20% in Q3 and 13.77% year-to-date, largely driven by AI-related stocks.
The price-to-fair value ratio of the US stock market rose to 1.03, indicating potential overvaluation.
Growth stocks are trading at a premium, while value stocks are at a discount, suggesting a strategic shift may be beneficial.
The third quarter of 2024 has seen intriguing developments in the US equities market, with attention on the performance of AI-related stocks.
As we approach the end of the quarter, investors are questioning whether the AI stock trade has reached its peak.
Q3 US Equity Market Boosted by AI-Driven Growth
As of June 24, the Morningstar US Market Index, representing the broad US equity market, increased by 3.20% for the quarter and 13.77% year-to-date.
This rise has been largely fueled by the performance of stocks related to artificial intelligence.
AI Stocks Leading the Charge
The second quarter’s gains were concentrated in a handful of AI-related stocks, including Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), and Broadcom (AVGO).
An attribution analysis reveals that without these gains, the broad market index would have declined. This trend raises questions about the sustainability of the AI-driven rally.
Market Valuation Concerns
The US stock market’s price-to-fair value ratio rose to 1.03, reflecting a 3% premium over fair value estimates as of June 24.
While this doesn’t yet signal an overvalued market, it places it near the higher end of the fair value range seen since 2010.
Historically, the market has only traded at this premium or higher 10% of the time.
The AI Surge and Its Implications
AI-related stocks continued to surge, heavily influencing the Morningstar US Growth Index and, to a lesser extent, the Morningstar US Core Index. Both indexes outperformed the Morningstar US Value Index.
However, based on current valuations, the outperformance of these AI stocks appears to be waning.
Growth vs. Value Stocks
Growth stocks traded at a 6% premium to Morningstar’s composite valuations, and core stocks at a 7% premium as of June 24. In contrast, value stocks remain attractively priced at a 9% discount.
This disparity suggests that long-term investors may benefit from shifting focus from overextended growth and core stocks to undervalued value stocks.
Sector Analysis and Investment Strategy
Given the current market dynamics, we recommend adjusting your investment strategy.
Growth and core stocks have become overextended due to the AI-driven surge, making it prudent to underweight these stocks. In contrast, value stocks present a better margin of safety and potential for future gains, warranting an overweight position.
Additionally, focusing on small-cap and mid-cap stocks is advisable, as these categories offer attractive valuations compared to the increasingly overvalued large-cap stocks.
Specific Sector Opportunities
While the broad market shows signs of overvaluation, there are specific sectors with promising opportunities:
Real Estate: Despite negative sentiment, real estate, particularly REITs with defensive characteristics, offers attractive investments.
Energy: The energy sector, trading at a discount, provides a natural hedge against geopolitical risks and persistent inflation.
Basic Materials: Select gold miners and agricultural chemical producers offer value, even in a slowing economy.
Shifting Focus to Value Stocks and Small Caps for Better Returns in 2024
The concentrated rally in AI stocks during the third quarter of 2024 has sparked worries about market overvaluation.
As we look forward, shifting focus from overvalued growth and core stocks to undervalued value stocks and smaller-cap opportunities may provide better investment returns. Stay informed and strategic to navigate this evolving market landscape effectively.
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.
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