Hello and welcome to another edition of the bulls vs the bears. Today I have another poignant message for you. Trade against the trend and your trading account becomes a black hole. This is not a joke. This serious. You absolutely do not want to turn into a gambler and hope against hope that somehow you fan make a profit going anti-clockwise. Your trading account will absolutely feel like your skull if you try that.
Look why do you want to trade against the trend when the trend is showing you the money? You will be absolutely nuts trying to go against the grain. I know it’s human nature to explore the unknown sometimes. But this is not Russian Roullete. This is Forex Trading. And forex trading is a business. And the best way to profit as a trader is to go with the trend. If you are a rookie trader listening in on this post, read my lips”DO NOT GO AGAINST THE TREND!” Just take the path of least resistance. As the popular saying goes,”The trend is your friend.” So don’t act as if the trend is your enemy
So we are going to take a look at a few examples of how you can make money trading the trend and how you could bleed money trading against the trend.
First up is
An Obvious Bearish Trend using GBPUSD pair
Let’s take close look at the bearish trend around 25th August on the left side of the trend, It’s pretty obvious that the bearish trend is the winner here. It’s basically screaming trade me. Look at the bearish trade signal at the top of the trend. I mean how can you go against the trend?
Let me let you in on a little secret. When traders trade trends, they move in the same direction. I can hear hear somebody asking “Why is that so?” Well it’s the least course of resistance. You follow the path that is most travelled. The last thing you want to do is go against the grain and blow up your account.
When a market trends it makes a titanic move in the direction of the market. But then it pulls back to its most recent average price(Look up We are moving Averages Parts I and II). With that in mind, you trade from value since trends tend to resume at the point of value. You then look for price action opportunities that are backed by a confluence of trend and the average price behind them.
Now let’s take a look at an illustration of the dangers of trading against the trend using the same GBPUSD
Take a close look at all the countertrades against both trends on the screen. There is absolutely no way you are going to make any money going against the grain Take a look at all those failed countertrend inside bar setups. It’s like trying to get in the way of a moving train when you try to trade against a stromg trend.
Don’t get so caught up in trying to trade against a strong trend that you put your account in harm’s way. You will definitely blow a huge crater in your trading account if you try to get in the way of a strong trend.
Now let’s take a close look at a clear trend using the USDCAD pair.
Here we see a nice strong uptrend glued to the channel on our right under the month of October. Not only do we see strong a trend direction, but we also see a value area that we can enter to a trade as far as price is concerned. This value area runs parallel with the strength of the uptrend.
See the numerous price action buying opportunies that the pin bars and inside bars present on this uptrend. It is pretty obvious the uptrend is the least course of resistance. Why would you want to against that? So looking for buy signals on this trend is the obvious choice, not trading bears on the downside.
Committing Suicide Trading Countertrend
However you’d be committing suicide if you so much as consider looking for a counter-trend signal on this chart. You see the the two long-tailed pin bars bearish pin bars? Even these two would have incurred for you a huge loss. The least you’d gain from these two is breakeven, at best. So when you see a strong trend, don’t fight it. Embrace it.
Next up is an
Obvious Downtrend Featuring the USDJPY pair
Take a look athe downtrend between 20th November and 4th December 2020. It’s pretty obvious isn’t it? You’d be crazy to go against that. So in this situation you’d be looking fo price action sell signals retraces back to the resistance level so you can trade parallel to the downtrend. Notice the pin bar signals forming following retraces within this falling market. This setup triggered this huge downward surge
Countertrend Pin Bars
Now take a look at the same chart and zoom in on the countertrend pin bars. You can see they have failed miserably. Anybody in his right mind will not even dare trading such lost causes. It makes no sense chasing bad money with good money. Try pursuing them and the only return you’d get is a huge hole in your trading account.
That’s s a wrap for “Trade Against The Trend…And Your Trading Account Becomes A Black Hole.” I hope you now understand that trading against the trend can be dangerous to your trading account, not to mention your health. When you trade on both sides of the trend you give back all your hard-earned profits like you are giving away confetti.
So What should be your New Year’s Resolution? Follow the dominant trend and avoid the countertrend like the plague. Your trading account will be the happier for that if you follow the direction of the trend.
Til next time take care.
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