Today I want to discuss with you the theme of trading against the trend.
This occupation is extremely risky, while everyone wants to catch a reversal, because they can bring huge profits.
Why is it so dangerous to trade against the trend?
We all know that the trend is our friend.
And you must always remember that this friend is very strong.
Nobody knows when the price will start to reverse, which means that if you decide to trade against the trend, you will most likely be stopped.
Therefore, trading against the trend was called
“CATCH FALLING KNIVES”
Traders look at the history of price movement and it seems to them that it is easy to predict a reversal: there is a top, there is a pattern, but not everything is so simple.
If you are more careful, you may find times when the price formed spikes or reversal-like patterns, but there was no reversal.
If you entered at such a time against the trend, you would lose everything.
Most of the traders lose their money precisely due to such situations when opening a position against the trend.
This is the most dangerous occupation in Forex.
You can see many patterns and the price will not reverse yet.
Therefore, you must analyze the whole picture as a whole, you must not rely only on patterns or indicators.
When it is not clear who is stronger than the bulls or the bears, i.e. the market is trading in a range, it pays to trade with small targets.
And of course you need to trade from the levels.
In range, trading is carried out cape from level to level, there will be your target.
Range trading is more difficult than trend trading, but easier than counter trend trading.
How to trade?
The ideal situation to trade against the trend would be when, after a strong move, with large candlesticks, a double top begins to form.
A double top is a sign of a weak trend.
In this case, the first vertex must not be far from the second.
If the first peak is far away, then the price has reached the level.
Trading from a strong level is a good idea. Here you will often see trend changes.
It is worth noting that the closer the two peaks are, the stronger the sell signal will be.
At the same time, it is worth remembering that this move may only be a temporary correction.
Don’t over-position in anticipation of a big move.
The ideal combination to enter against the trend would be the level and the pattern formed.
You should enter when the market has already reversed, that is, the second high is clearly visible on the chart.
Even if you entered perfectly and the price goes where you need it for some time, you should not relax.
Note that this may just be a correction of a previous big trend.
At the slightest sign of a continuation of the previous trend, exit.
It is better to make a little profit than to lose everything.
If the price moves confidently enough, set a taking profit according to your strategy.
You can set a Take Profit 3 times the Stop Loss.
Or, if you know how to hold positions correctly, you can put a stop loss at the next closest level.
A good sign
A candle with a long shadow is a very good sign.
As a general rule, after such a candle, the price goes in a different direction relative to the shadow.
A long shadow means that the price broke above the level, but failed to consolidate and went in the opposite direction.
This is a sign of weakness in the trend and a good sign to trade in the opposite direction.
Trading against the trend is the most dangerous, the most difficult.
If you decide to trade against the trend, wait for the signals, don’t rush.
Look at the price very carefully, even if it goes in the direction you want.
Over time, you will learn how to better enter trades and then trading against the trend will bring you more profit than loss.
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I’ll be happy