subject: Why Do All Your Forex Counter Trend Trades Fail? [print this page] Forex trading is no easy task and counter trend trading adds unnecessary elements to the equation. To trade profitably you need to identify the major trend and go with it. Don't fight the crowd but rather blend in with it. The main job of a good trader is to identify which way the crowd momentum is moving and get on board before it leaves without them. Counter trend trading is takes the opposite approach. To make money a trader needs to pick tops or bottoms in the market and then quickly take advantage of a reversing market.
More often than not these counter trend traders are inexperienced retail traders who lack the necessary skills to identify trends and high probability trades. They rely solely on feel for the markets and their participation in the markets is usually short lived and ends in a complete account meltdown.
Traders just starting out in the markets have no reason to start with counter trend trading. Years of market knowledge and price reading skills are necessary to successfully time entries and exits. Trend trading is far easier and much more predictable. Not only that, but trend trading also holds the potential to be more profitable. Counter trend trades are generally much smaller than their major trend relatives. That results in less reward for far more risk per trade.
Trading counter trend requires additional work for less benefits and increased risk. A counter trend trader must first identify the major trend and then focus on the counter trend. They have to be right on two different market components. One that the major trend is actually present and the second that a smaller counter trend is taking place inside that trend. They automatically double their chances of being wrong before they even start their technical analysis.
For novice traders, the best advice would be to stick to the major trends. Work on building up your technical skills and when you are profitable and comfortable with your system then, if you are still interested, try your hand at counter trend trading. Focus on the basics before you jump head first into the deep end.
There are exceptions to every rule and counter trend trading is no different. Some traders naturally excel at going aginst the major market moves. The market takes all kinds of different participants in order to operate and I can rest assured knowing that eventually the counter trend traders will get caught on the wrong side and I will be the one benefiting from it.
by: Jeff Niles
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