Counter-trend Trading Techniques For Profitable Forex Trading In Singapore – Strategy after strategies are widely used by traders to find entry opportunities and benefit from the price movements of the asset. Trading “with the trend” is a popular approach, however, there are many opportunities to be found in temporary price corrections. To profit from them, traders can apply the counter trend trading strategy.
The countertrend strategy is an approach used in the short and medium time frames, where traders seize moments of temporary direction changes and open contracts to take advantage of the correction. Focusing on smaller profits, traders typically open multiple short-term trades to target price movements. The convenience of this approach is that it can be combined with an evolving strategy. Which means a trader can make multiple transactions in the same asset.
Counter-trend Trading Techniques For Profitable Forex Trading In Singapore
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The trading strategy targets temporary price reversals in development property. Traders use technical indicators as well as chart patterns to confirm reversal signals. Stop losses and other risk management tools are an important part of the approach. Traders immediately stop trading if the reversal does not continue.
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The asset is in a strong bullish broader trend over the week. However, there are regular short-term trades that provide opportunities to profit from the reversals. To do so, a bearish contract can be opened every time a reversal is expected, with a stop loss level set to protect the position from higher than expected losses.
Traders who use the counter strategy often hold multiple positions at the same time, maximizing their potential profits. The countertrend is similar to swing trading, where traders catch small market moves and build more income from small profits.
First select an asset you want to trade. Avoid highly volatile assets as this can increase the chances of your stop loss phase being triggered.
Then choose technical analysis tools to find potential pivot points. To do this, you can use indicators such as moving averages or RSI. Additionally, you may look for candlestick patterns to confirm the signal.
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Once the entry signal is confirmed, it is important to apply the necessary risk management tools. Take profit and stop loss points should be set to help control the outcome.
Let’s look at a practical example of an anti-trend trade strategy. The example below shows the 15-minute price chart of the AUD/USD currency pair. The asset is in a bullish broader trend, with some bearish reversals shown.
The price action starts with a bullish trend, then the RSI indicator shows a reversal signal. The reversal is confirmed by the first bearish candlestick, which means that a bearish position can be opened.
A stop loss is placed above the top of the completed bearish candle. The RSI follows the reversal until it indicates a possible reversal of the bullish trend again. This signal is confirmed by the next green candlestick, at which point the trader needs to exit the trade. This sequence is repeated on the next return, with a longer descent.
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Trading against trends is not considered an “easy” technique, so it should be practiced a lot first. This method can be used by traders who prefer shorter time frames.
It is important to closely follow the trading strategy and implement the necessary risk management tools to limit potential losses as much as possible. A high risk tolerance and the ability to manage strong emotions are key characteristics of a countertrend trader.
In this post, we look at trading against trends and how you can use it in your own trading.
When you make a contrarian trade, you are looking to profit from the swings higher or lower against the main trend.
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Counter trend trading is so popular because you can do it in any market and any time frame. You can also make short sharp trades and profit by going both long and short.
Most breakout traders will be swing traders who want to book profits when the price swings against the apparent trend.
In the example below you can see a clear trend lower. Prices had been making a series of lower highs and lower lows.
A countertrend trader would look to buy the swing low and profit as the price moves higher against the lower trend.
Combining Trend And Countertrend Indicators
Countertrend traders will often analyze the price action and can use popular indicators such as moving averages to help them find their trades.
You can use price action analysis and indicators like moving averages to find when the price is trending higher or lower.
After you have identified a clear trend, you are looking for an opportunity to trade against the trend.
One of the best indicators you can use to find these trades is the Relative Strength Index (RSI).
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RSI is a simple indicator that can help you identify when the price action is overbought or oversold.
You can combine this information with your price action analysis to find trades once you’ve identified overbought or oversold market conditions.
Countertrend traders often use a combination of price action and indicators to find and execute their countertrend trades.
One of the simplest methods to trade against a trend is to combine price action with an indicator such as the Relative Strength Index.
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By using the RSI indicator, you will be able to identify when a market is overbought or oversold and is looking at a potential correction.
Countertrend traders may be looking at this support level to make potential long trades against the trend lower and look for price to correct against the trend.
Two popular indicators for making resistance trades are the stochastic oscillator indicator and the relative strength index (RSI).
These indicators can help you identify when the price is overbought or oversold and when the price may soon be correcting.
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Must the reading move above the 70 level; it indicates that the price is overbought. This could also indicate that the price is heading lower on the reversal.
On the flip side, when the price drops below the 30 level, it indicates that the price is oversold. This could be an indication that price will reverse and move back higher.
The easiest way to perfect these strategies is to download some free demo charts and make practice trades. That way you can experiment with different markets and different time frames.
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Countertrend (or otherwise called flat) trading systems are prevalent. Why are they so popular? Because the market is flat 70-80% of the time and only 20-30% – in development.
By using these reverse trading system features, you can build expert advisors that can successfully trade the flat market.
Attention! Such advisors need effective management from the trader. If you launch such a robot to trade the entire market, it will do well while the market is in a flat. However, it will lose all earned profits as soon as the market reverses in trend.
You should develop the algorithm to determine the position of the market and test it on history. You must launch the apartment business advisor on the devices that are in the apartment. Only then can your trading robot start showing consistent results.
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Money management is essential when developing an EA algorithm. Here are the possible options that you can implement in your trading robot:
It is the simplest and safest method of money management in a robot. But its effectiveness is justified only in very accurate trading systems, where the market entry point is chosen with a high probability of a profitable trade. This method makes high demands on the trading system to produce positive results.
This method can bring a lot of profit for the trading system, which should be tested at least on a minimum standard cycle. If the results are good, this method is proven to be used in practice. However, the requirements of the trading system are still high as the dollar stop loss is fixed.
When you develop an expert advisor, you can implement all three of these methods of money management. As you gain experience, you can collect trading statistics for all of them to determine which one is the most profitable.
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In flat trading systems, you should not expect huge profits as the price stays in the range. Its movements are short. Therefore, it is necessary to implement the following principle: Take profits quickly!
While you wait longer and average your losses, your profits must be made quickly and in small amounts. Here are some options to take profit:
Trading robots based on the principle of loss averaging often use a fixed Take Profit in dollars. If it is not large, it can give consistent results.
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