Investment trend is about putting money in stocks, industries or markets expected to boom consistently over the long term. It’s a strategy that can deliver significant gains and helps you grow your wealth over time. However, successful trend investing requires knowledge and preparation.
There are many investment trends gaining momentum in the financial world: cryptocurrency, ESG investments and do-it-yourself (DIY) accounts are just a few of the latest buzzwords you’ll see on social media or hear about from your friends. But before you dive into any new investing fad, take some time to think about the questions and risks involved.
One common practice in trend investing is to use moving averages as indicators. The simple moving average is a line that plots the average price of a stock over a certain period of time, like a month or a year. Traders and technical analysts pay close attention to this indicator when identifying potential investment opportunities.
Oftentimes, when the price of an asset breaks above or below support or resistance levels, it signals a potential trend breakout. For example, if an asset’s price breaks above resistance, investors will go long; if the price breaks below support, they will short the asset. Once they determine which rules to follow, they select their assets and weight them based on their risk budgets, establish a rebalance cadence, and blindly follow their system (hopefully). In theory, this is the financial equivalent of boarding up your windows during a storm: small and frequent losses are offset by rare but massive wins.
