One of the old adages of trading stocks is "the trend is your friend." The wisdom behind the adage is that a trend in stocks means that a stock has fundamental or technical support assisting it in the direction it is going. Therefore, by following a stock trend, an investor is able to trade into an existing direction without needing to guess where the stock or market will go.

On the Other: Stocks Become Range Bound

Often individual stocks or entire markets become range bound. This means that they will stay within a set price range for a long period of time, and there is no sustained trend. Therefore, anyone who is following a trend will be unsuccessful because each small trend dissipates without yielding a sustained, long-lasting trading move.

Bottom Line

Trading with trends requires patience. When stock markets become range bound, trend trading is nearly impossible. However, when trends in the market are sustained, following trends can be a successful strategy for investing. The key to trend trading is knowing when stock markets are trending, and when they are range bound. For further information, one can read Curtis Faith's book "Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders." In the book, Faith reveals his groups strategy for trend trading but also illustrates how he and his group at times suffered enormous losses.

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following trends can be a successful strategy for investing