How to find stock trend and trade in Trending stocks

How to find stock trend


Trending stocks are stocks which are moving in one direction for a short period of time. Example a stock moving higher from last 3 days is a short term trending stock. Usually trending stocks are traded by catching them at beginning of trend or at confirmation of a trend and selling them at end of the trend.

2.Structure of Trending stocks 

There are few ways in  which you can identify a trending stock on a chart. They are 

  • Higher highs and higher lows: To check the trending stocks, you have to see the higher highs and higher lows on the chart. The stock is able to push to new highs with each new round of buying. Let us take an example, you are looking at a staircase on which someone is going up the stairs and You won’t have one stair below the prior one.
  • Time factor : The stock will keep on moving up or down quickly if it is in trending. You should not be able to stay range-bound for any extended period If you are actively buying stocks. The main thing you have to follow is the stocks should have some movement .

3.How long can stocks trend? 

To be honest , there  are no limits on how high or low a stock can move if you are trading on a trending stocks . Unless we see patterns or indications from technical charts that trend is about to end , you can expect the stock to move up continuously. You must exit a stock when it is no longer trending.

4.Trending stocks in Intraday?

There will be a lot of times that a stock is trending just for intraday against its natural trend. This is called minor trend and usually happens for intraday or two to three days . It is possible to find a stock which is trending on an intraday basis. Here are the rules for intraday trending stock process.

  • Stock movement in the morning : Most of the trending stocks start moving up the moment market gets open because of their inflow of volume. The morning breakout trades gives you the opportunity to gain profits. 
  • Mid-day stock moment: The stock will begin to trend usually in afternoon , around 1.30 PM when buying comes in and trend resumes. This will make an opportunity to open or add to an existing position. 

5.Probability of finding trending stocks

The market is mostly sideways and volatile. Out of 10 trading days , usually we find markets trending just 1 to 2 days. There can be individual stocks that are trending for longer times . The market moves either way 4 or 5 days out of the month. Many stocks will assume strong trending behavior. When profit takers exit their position, stock will move back to original breakout point. You need to figure it out whether you want to take the big trends and hold until your target is hit or you want to make your profits within the ups and downs without finding stocks which are trending in one direction and react accordingly.

6.How to find trending stocks?

The trending stocks can be found by using StockScreener . Intraday screener is a tool which can be used to select stocks for intraday trading easily. Stocks that moved 10% in last week is also a simple way to start filtering out trending stocks

7.Indicators used to find trending stocks

Like all other indicators, we have indicators that use The highs and lows on the chart and helps to find trending stocks. There are two indicators which are majorly used, which are

  • Momentum Indicator : It is designed to reveal the major movement in a market or security in order to show a potential move. You have to find a momentum indicator that move sharp higher after an extended period of low volatility to find trending stocks.
  • Volatility Indicator : The Bollinger Bands are an on-chart volatility indicator. It uses a standard deviation of recent price action to show how far a stock can move higher or lower. You have to find stocks which does not show any moment, and then have a sharp move higher.