The Basics of Trading a Trend

One of the most fundamental principles in trading is the saying, “The trend is your friend.” Yet, many traders resist this principle, trying to predict reversals instead of simply following the market’s momentum.

Trading in the direction of the trend is one of the easiest ways to improve consistency and reduce unnecessary losses. From a risk-reward perspective, it makes little sense to fight the prevailing trend. Why try to short a 30% uptrend while risking 10% drawdowns, instead of simply riding the momentum? Understanding the trend provides a crucial big-picture overview of market direction.

The psychology of trend trading: catching a small move vs. missing the bigger picture.

For me, a clear trend is defined by price action that follows a structured market pattern alongside aligned moving averages. To confirm my bias, I also check volume (price movement should be supported by increasing volume in the same direction).

How to Identify a Trend

1. Analyse Price Structure

• Uptrend: Price consistently forms higher highs and higher lows.
• Downtrend: Price consistently forms lower highs and lower lows.
• Sideways Market: No clear trend, price is ranging between support and resistance.

If price is making higher highs and higher lows, buying dips is the best approach. If price is making lower highs and lower lows, shorting bounces is the ideal strategy.

2. Use Moving Averages to Confirm the Trend

Moving averages help smooth out price action and provide clearer trend direction. The most commonly used ones are:

• EMA 50 & EMA 200 for mid-term trend confirmation.
• EMA 9 & EMA 21 for short-term trend confirmation.

A simple rule traders follow is the EMA 50 - EMA 200 confluence:

• If EMA 50 is above EMA 200 → the market is in an uptrend.
• If EMA 50 is below EMA 200 → the market is in a downtrend.

Tracking moving averages manually can be time-consuming, but practicing trend identification is key. Don’t forget to review your trade performance in the CMM dashboard to monitor how well you’re executing within different market trends.

3. Use Trendlines with Key Levels

Trendlines help visualise trend direction by highlighting higher lows or lower highs. If price breaks a trendline, it’s a signal that the trend may be weakening, and traders should proceed with caution.

4. Watch Volume for Confirmation

A strong trend should be supported by rising volume:

• In an uptrend: Volume should increase on green candles and decrease on red candles.
• In a downtrend: Volume should increase on red candles and decrease on green candles.

Weakening volume often signals exhaustion and the potential for a pullback or trend reversal.

The Best Entries in a Trending Market

The best swing entries often come on trend reclaims—when price starts trading above a short-term moving average and begins forming a bullish structure (higher highs and higher lows). The same applies to trend breakdowns: when price loses a key support level and starts trading below its moving average, it signals weakness.

When looking for trend reversals, lowering your timeframe is essential. By the time the monthly chart aligns with the new trend, much of the move has already happened. While you should still track your monthly and weekly levels, entry triggers for a potential trend change are best identified on lower timeframes, such as the daily or 4-hour chart.

For larger market trends—let’s say the forbidden word, _altseason_—market alignment is crucial. Low-cap memecoins on Solana won’t perform well if Solana itself isn’t showing strength. The biggest assets, such as Bitcoin, Ethereum, and Solana, dictate the broader trend. Even if an altcoin appears to be in an uptrend, monitoring these major assets is necessary. While altcoins can sometimes run after BTC or ETH lose their short-term trend, it should be a warning sign to manage risk more carefully.

Key Considerations When Trading a Trend

A crucial but often overlooked factor in trend trading is liquidations and massive open interest (OI) wipes. A significant OI wipe frequently signals a reversal. Even if this doesn’t result in a full trend shift, it’s important to remain cautious and wait for confirmation before buying retests, rather than blindly entering positions.

Mistakes to Avoid in Strong Trends

❌ High Leverage: You don’t need to go 100x when the trend itself is strong enough to deliver solid returns.

❌ Tight Stops: Trending environments require giving your setup room to play out. You may not catch the exact bottom, but if your analysis is correct, the trend should eventually work in your favor.

❌ Over-Managing Trades: Not every 15-minute hammer candle signals the top of the move. Stick to your plan and let your trade develop within a proper risk management framework.

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Trading with the trend simplifies decision-making, reduces stress, and improves consistency. Instead of trying to outsmart the market, embrace the trend, manage risk effectively, and position yourself to capitalise on high-probability moves.

Make sure to track your progress in the CoinMarketMan dashboard to fine-tune your execution and improve your overall strategy.