How to Trade a Trending Market

January 26th, 2022

Have you ever wondered how to trade futures in a trending market? In his recent NinjaTrader Ecosystem webinar Market Sense Indicators for NinjaTrader, founder Daniel Sinnig explained one strategy for identifying and trading a trending market.

Sinnig defined a ‘trending market’ as a market condition “in which the market moves for a prolonged period of time in one direction”. Imagine tracing a trendline along all of the market highs in a given period, and another along all of the lows in the same period. Do all of the highs and lows fit into a clear “channel” between two parallel trendlines? That could indicate a trending market, with the direction and slope of the channel indicating the direction and strength of the trend. You may hear this concept described as “higher highs and higher lows” for an uptrend and “lower highs and lower lows” for a downtrend.

So how do you trade a trending market? Sinnig said, “the chances that the trend will continue are higher than the chances that the trend will not continue and reverse”. You can take advantage of this statistic by entering in the direction of the trend. This is the meaning of the saying “the trend is your friend”.

It is important to note that this kind of trade often requires a wide stop-loss. Sinnig explained that even when the market is trending upwards, it will still “bounce back quite a bit” along the way. This means that a tight stop-loss may cause you to be stopped out, even though the market may continue on upwards.

Of course, a wider stop-loss opens you up to greater risk. One method for mitigating that risk is to enter close to the lower end of the trend channel and set a stop-loss just below the channel’s lower boundary. This strategy allows for a tighter stop-loss.

In this short clip, Daniel Sinnig introduces the characteristics of a trending market and explains one strategy for trading in those types of conditions. If you are interested in learning more about different market conditions, be sure to check out Sinnig’s full-length webinar.

If you enjoyed this clip, be sure to also watch Discover Powerful Trend & Countertrend Indicators, which is also hosted by Daniel Sinnig, and Discover a Core Trading Strategy with Paul Bratby of Trade the Fifth!

You can also browse a library of free trading webinars on NinjaTrader Ecosystem’s Free Trading Videos page!


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