One of the forex trading methods that I teach is how to trade against the higher time frame trends, and quite a few of my students have become very good at this style of trading by knowing key price levels, among other things. I know this approach has a lot of appeal to a lot of traders, and most importantly, it can be very lucrative when done properly.
Some people like to trade with the trend, others like to find places where price is likely to stall out and reverse. And actually, what is the trend? Well it’s all relative to the time frame you’re looking at, right?
So it’s really going to come down to your own style of trading and what you’re comfortable with. But let’s have a little closer look at what I’m talk about when I say "counter-trend".
If you were to look at a daily chart of a currency pair, you may decide from looking at it that the trend is generally up. And that assessment could be based on some sort of a moving average or other factors.
Then if you drilled down to, say a 4 hour chart, you may say the same thing, it’s just generally heading up. Going down to the 15 minute chart, again, we could have the same situation, with a nice rally on the day. So why would you possibly be looking to sell this currency pair?
Well, when you understand the things that can pre-empt a reversal, and the various factors involved, you can be alerted well ahead of time to the possibility of price turning around and heading back down, at least in the short term.
Now, I get emails regularly from people who took take counter trend trades the way I teach them in my courses and services, and they can become very successful at them once they learn exactly what to look for in these set ups.
Counter trend trading definitely has its place, and of course, I know it’s not for everybody. But there are some people that do nothing but this style of trading, and the do it very, very successfully, and in fact there’s a lot of interest in doing these kinds of trades, so actually later on in October I’m going to be holding a webinar showing exactly how to do these kinds of trades.
But the main point here is that you really need to understand the driving force behind the things that set up counter trend trades from both a technical and a market "environmental" point of view.
Counter trend trades can set up on an intra day basis for short term pip gains, but they can also be done on much higher time frames as well, when you understand what to look for.
One of the really big keys to doing these trades is to learn how to do them with extremely small risk. In fact, the cornerstone of all of the trading styles that I teach, is keeping risk small—very small, while at the same time, allowing for much larger profits.
Learn to counter trend trade properly, and it can be all you ever need to do in forex trading.
Thanks so much, I hope the forgoing information helpful. Please let me know if you have any questions!
All the best,
Vic Noble
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