We all have these moments when the phrase «trend is your friend» flies out of the head. Every day we face moments when trading positions against the current price movement look so attractive. Correction is the quickest way to make money in the market, right? Unfortunately, it’s not always the case.
Trading against the trend is much harder the trading in the trend — either from the technical and mental points. In this article (you can join the discussion in commentaries) we speak about advantages and disadvantages of counter trend trading. I will try to prove my point not to trade against strong movements and describe cases when such positions worth it.
Why opening positions against the trend is so dangerous?
When we analyze the historical data on charts we consider only the extremum points, not paying attention to the dynamics. Price could reach the maximum or minimum point several times before going back, so if executed a counter trend algorithm, you could enter the market several times on candle, and respectively lose money several times.