An initial risk rule determines position size at time of entry. Exactly how much to buy or sell is based on the size of the trading account and the volatility of the issue. Changes in price may lead to a gradual reduction or an increase of the initial trade. On the other hand, adverse price movements may lead to an exit from the entire trade. In the words of Tom Basso, in the book "Trade Your Way to Financial Freedom" The key reasons for trending markets are a number of behavioral biases that cause market participants to over-react:  Herding: After markets have trended, some traders jump on the bandwagon, and thus prolonging the herding effect and trends. Confirmation Bias: People tend to look for information that confirm their views and beliefs. This can lead investors to buy assets that have recently made money, and sell assets that have declined, causing trends to continue. Risk Management: Some risk-management models will sell in down markets as, for example, some risk budgets have been breached, and buy in up markets as new risk budgets have been unlocked, causing trends to persist. A trader would identify a security to trade (currencies/commodities/financials) and would come up with a preliminary strategy, such as:   The trader would then backtest the strategy, using actual data and would evaluate the strategy. The simulator would generate estimated number of trades, the fraction of winning/losing trades, average profit/loss, average holding time, maximum drawdown, and the overall profit/loss. The trader can then experiment and refine the strategy. Care must be taken, however, to avoid over-optimization. It is possible that a majority of the trades may be unprofitable, but by "cutting the losses" and "letting profits run", the overall strategy may be profitable. Trend trading is most effective for a market that is quiet (relative low volatility) and trending. For this reason, trend traders often focus on commodities, which show a stronger tendency to trend than on stocks, which are more likely to be mean reverting (which favors swing traders). In addition to quiet low volatility markets, where trend following strategies perform well, trend trading is also very effective in high volatility markets (market crash). Trend traders "short" the market and benefit from the downside market trend. Techniques:  Related phenomena:      Wedi 7  The Welsh-language television programme first aired in 2003. It was presented by the programme's editor, Angharad Mair, and included Wales' news including leisure, entertainment and all the local events.