Namely lower highs and double tops for shorts and reverse for longs. Even if they don't work the risk is so small it doesn't even matter....and when they do work, sometimes you get a headstart on a much bigger move. Now this is something that runs into the timeframe and market type discussion - rangebound markets, this is a great setup, especially taken at the top of a range - rules are pretty easy to follow and this yields smaller but quick and relatively easy profits intraday. In this market, however, this is something I wouldn't dare doing for a swing trade....never know what will happen the next day.... Tech and gold last week - awesome charts one day and crash and burn the next....lol
Thats a good point in that I can do a decent job spotting the top of the 1st, 2nd and 3rd peak but the 1st and 2nd doesn't provide much other than an uneasy scalp. Its that 3rd or 4th final push (final flag per al brooks) that counter trenders should focus on.
That's the sweet spot, where the early counter-trenders finally capitulate and stop the pain at the worst possible price, and greed takes over as the trend-followers begin to take profits and the smart counter-trenders pile in at what will very likely turn out to be the best possible price. If you're an experienced trader, you know how to do it, but if you're inexperienced and don't understand trends, consolidation and breakouts, you absolutely shouldn't counter-trend trade. If you've never successfully bought a new high in an uptrend or sold a new low in a downtrend, then you will very likely lose your ass trying to counter-trend. If you don't believe me and you still have burning desires to trade against the trend, there is a technique that may help save you from dreadful losses. If you feel price has gone too high or too low and you're itching to put on a counter-trend trade because you're afraid of missing the move and you believe the top or bottom is so close that even if price continues to move further you can simply average down a few times, stop right there. Now, assume you put on the trade at that point in time and then choose a disaster stop, a price where you are certain you can enter now, average down and not get stopped out, a price you are certain will never be reached before reversing. Then, wait for price to get there and put on the counter-trend trade.
It is a good question. Here is my answer... "Monkey see, monkey do". They are lots of traders out there that are viewed as experts and praised because they sold the top or bought the bottom. Other traders try to emulate. There may also be the idea that most of us are bargin hunters and want to get the best price which is at the tops and bottoms. From my own experience, it is better to just go with the flow and not try to guess tops and bottoms. Now I will try to cherry pick bottoms in an uptrend, but only after a lower high is made in a previous support zone.
Counter trending can be profitable, provided you have studied thousands and thousands of hours of price action. Reading a book or even a library does not count. This is something that must be experienced hands on. Incidentally, counter trending provides lower risk entries in comparison to trend trading as the entries are infinitely more precise. Anyone with a clue knows what I'm talking about. Basically, unless you are profitable with retracements you do not touch counter trend because it clearly suggests you don't know your game. The above might sound contradictory, believe me, it is not.
Markets behave differently. It's quite amusing to watch as two sides throw stones at each other, the old "trending vs countertrend" fight. In reality, both can be profitable when trading different markets.
Iâm waxing a little philosophical today A trend by any other name - is still a trend A trend is the only way one can make money ---------------------------------------------------------------------------------------------------------------------------------------------------- Start out a day purposely looking for tops/ bottoms/ turns â will break your account Start out a day trading price â tops/ bottoms/ turns fall into your lap â and grow your account Just a thought... RN
Because they have heard (and rightly so) that the only traders who make money are those of us who counter trends in the long run (like me buying during recessions/bear markets). They try to do so with peanuts, no savings and no day job. They can't wait because they need money now, so they lose.
Many trading books preach that the crowd aka the general public is wrong 99% of the time, and that the real money comes from trading against these people. However if the crowd is responsible for developing trends, then maybe this logic is wrong, and we should all trade with the crowd and stop betting against them. Maybe this is only true in a pure scalping enviroment?..i dont know. I can say that my trading has gotten better when I trade when, and only if there is a trend. If there is not a trend, I either wait, or look for another stock. For those that need constant excitement are the ones that write our paychecks .