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How to follow the trend?

|Includes: Live Nation Entertainment, Inc. (LYV), NYT

 Compliance with the trend reflects an active investment and capital management strategy. In the previous article I wrote how to find the trend‘s beginning. If you have problems understanding it, don‘t be modest and ask.

Initially, we should define what the trend is. Investopedia describes the trend as follows:
„The general direction of a market or of the price of an asset. Trends can vary in length from short, to intermediate, to long term. If you can identify a trend, it can be highly profitable, because you will be able to trade with the trend.“ (www.investopedia.com/terms/t/trend.asp)

Trend Is My Friend
Every investor knows that. However, many investors fail to make a friendship with the trend. And I know why. I have experienced the same myself and I found a mistake. I can reassure you all, the error is very simple. But about it later.

If the share price fluctuate narrow horizontal channel, we have no trend. It‘s the flat. The flat means that there no new information in the market.

It is important to keep in mind one very important thing. Profits earned in the stock market only in the Uptrend or Downtrend.

You will lose your profit (money), if you trade in the flat. Except you are day traders.

But when the new information appears, the price starts to move up or down. A position between price and simple moving averages (NYSE:SMA) shows the nature and strength of information. The Alligator is the best known combination of the SMA for us.

Therefore, we use the Alligator in our active investing.
Let‘s look at the examples from our daily Investing Ideas review. A good example is LYV (6.95)
Shares of Live Nation Entertainment, Inc. bough when we founded an input signal in the daily chart (1 pic). When the share price has risen and it was a profit in position we decided to follow the trend in the weekly chart (pic 2). We have decided for two reasons.

1 pic. Live Nation Entertainment, Inc. (NYSE:LYV) daily chart.

First, the daily chart have been forced us to close the position with a small profit after a few weeks.
Second, the price is still high above the Alligator in the weekly chart. And this allows us to quietly keep an open position and grow up profits.

2 pic. Live Nation Entertainment, Inc. (LYV) weekly chart.

Model with LYV example is not finished template for your successful trade. The market is diverse and in every case we have to find a single approach. The New York Times Company (NYSE:NYT) (8.02-12.45) chart is a good example for that. We found input signal at 3 November. The next session buy-long order was executed. Share price significantly valuates, so we wondered to use a daily chart. We placed the initial Stop Loss at 7:54 USD. Share price has risen. A flat was later. When the price came out from the flat, we took an advantage of opportunity to fill in our position (arrow in pic 4.)

3 pic. The New York Times Company (NYT) daily chart.

Prices continued to rise and it is a long time – since the beginning of December until mid-January – was above the Alligator. When the price began to move toward the Alligator, we began to look for the exit point. Several points can be here, but our main point is the crossing of the Red line. It was harvested on 21 January. Price not given rise the next session and we have booked a solid profit. Now we can see that the decision to take profit was well-timed, because the share‘s price still fell.

4 pic. The New York Times Company (NYT) trend following.

Only beautiful examples are described here. I think you have a question, it‘s correct or not, it‘s effective or not, can this be taken for granted. It’s a very good question. I am sure that you are not successful the first time. And the second one. It‘s difficult to follow the trend at the beginning. There will always be temptations, such as quick-profit booking or finding an accidentally some kind of information on the Internet or even something like that.

The practice is a key success factor. Trends will never be your friend if you have not buying the shares. This is very basic reasons. As well as trends will never be your friend, if you often buy and sell.

Lack of patience is often done by other error, we can reveal that. There are many reasons for lack patience. We will talk about every reason separately and later.

I have managed to make friendship with the trend over a long period of time. But that’s not all. I will write about it all in the others articles.

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