In most cases, trading with the trend in Forex is considered less risky and more profitable. Of course, if you can see an uptrend or downtrend starting from a trend line or a moving average with small pullbacks, which moves as if in a channel, then you should only open trades along the trend. However, if there are incomprehensible zigzag movements in the market, then while you wait for the formation of a clear trend, it is easy to miss profits. Especially, if such movements last more than one month. In this case, you can trade cautiously against the main trend. There are several counter-trend strategies, as outlined below.

1. Trade on Corrections

Strong trend movements are often replaced by corrections, so they can also be used for profit. This usually happens after a release of important news, when price first rushes in direction of the main trend, and then a correction occurs. This pattern is used by traders who trade on the news.
First, they open entries in direction of the main impulse of an economic event, and when the movement exhausts itself, they close positions and open new trades in the opposite direction, increasing their profits. If you are going to trade this way, you should remember that corrections are always smaller in size than trend movements, so you should set minimum goals for taking profits.

2. Scalping Strategies

For scalpers, any price movement is worth trading including trading against the trend. Since scalpers use small take profits, and the duration of transactions does not exceed 5-10 minutes, they can successfully trade with and against the trend.

3. Trade in Channel

Sometimes price moves in ascending or descending channels, starting from both the upper and lower boundaries. In this case, you can open positions in both directions regardless of the main trend. The only difference is size of take profit orders. Your take profit should be larger if you trade in trend direction than against it.

4. Trading Using Oscillators

You can also trade relying on oscillators. For example stochastic oscillator can be used. When stochastic lines intersect in the overbought zone, traders sell, and after intersection of stochastic lines in oversold zone, traders buy. You can read more about stochastic signals and other oscillators in the lesson about “Oscillators in Action”.

5. Searching for Reversal Patterns on Chart

From time to time current trend ends and reverses. If you are able to stop this situation in the right time, it can bring you large profits. However such situations happen extremely rarely and trading against the trend can cause considerable losses.
If you want to trade against trend successfully and profitably, you need to pay attention to the following nuances:

  • It is possible to conduct trades only if there are levels of support or resistance.

  • Before conducting a trade take a look on higher time frame.

  • Pay attention to reversal patterns formation.

  • Before conducting a trade wait for confirmation in form of level retest.

  • Set small take profits when trading against trend.

  • Trading against trend requires using pending orders.

Related posts

site call
live chat