In fact, there are many opinions on this topic. Someone says that you need to trade with the trend, someone that is against the trend. Anyone can learn to trade if they mentally decompose the market into 2 components:
- Buyer;
- The seller.
Go to the video by link - youtu.be/eV1nuHAmaQE
The buyer and the seller always compete for the price, but there is no need to try to understand why the buyer and the seller need this or that price, but if there is a struggle for what level in the market, then they need this price for something, and for what - do not try to know. You'll never know:
- How much a big buyer wants to buy;
- How much the big salesperson wants to sell;
- Consolidation length.
Alexander Gerchik revised a large number of charts that trends and not trends, but a set of positions can last for a very long time. There were situations when consolidation, a set of positions - can last a year, and even 1.5 and 2 years. The biggest scenario that Alexander saw, when a large player sat in stocks for $ 2 and gained a position for 2 years, this very often happens in stocks that are illiquid. When a large player, some fund, needs to gain a position, it can be a company related to medicines, for example, the recruitment of a position can last from 0.5 to 3 years, depending on the liquidity of the instrument. Therefore, there are only 2 players on the market - a buyer and a seller.
02:09 What is the difference between trading with and against the trend?
When you trade with the trend, you must understand that there are always big pullbacks with the trend. Imagine that the instrument has a certain amount of gasoline to move, and this amount of gasoline starts to run out at some point, the trend does not end, it continues to be, but there is already a rollback in the market. What is a rollback for? Rollback is needed to refuel the tool, in order to get a position and continue moving further. Many traders love to trade the counter trend. Alexander Gerchik also loves to trade the counter-trend, because he always understands how this primary movement will be made. And how will this counter-trend movement be collected? When an instrument goes up, people who bought at the bottom sell a part at the top, but a huge number of people do not leave the stock, because they believe that the stock will rise and will sit for a very long time. And at some point, when the price does not fulfill the conditions that the trader expects, and any person, when he performs some action, he expects something, he begins to exit the position. The counter-trend appears on the market due to the fact that there are so-called "planted". That is, those people who bought shares at the top and see that when a certain level breaks through, they cannot specifically calculate how much money they lose because no one knows where they will take the instrument after the stop, everyone knows about this, who trades , therefore, they themselves initiate a movement, thereby leaving their positions, and initiating a counter-trend movement. This movement is always understandable, due to the forces due to which it will be generated. When you understand in the market - at the expense of whom this or that movement can be generated, then you can call yourself traders. Then you will earn a lot of money, since not everyone knows how to do this.
Hello everyone. My name is Alexander, I trade on the Forex market and at the same time I am the author of a website, a site in which I post everything that interests me in trading.
Lately, I have been persistently analyzing trends, trend movements, trading options for trends, in general, you understand, I am interested in everything related to trends. To date, enough information has accumulated so that I can tell you how to trade with the trend correctly.
Is the trend your friend
Trend is your friend, which means trend is your friend. I don't think there is a trader who is not familiar with this saying. You don't need to be an expert to understand the essence of these words.
Trend is your friend or trend is your friend, literally means, trade with the trend and you will profit. But behind these words, there is a threat that experienced traders certainly know about, but beginners are usually not told.
In principle, the logic is clear, if there is a strong trend in the market, then no matter where you drop in, even if there is a drawdown, the trend will still play its main role and will pull the position into a plus.
Let's take a quick look at an example:
There are two uptrends in the EURUSD pair:
- an uptrend on a higher timeframe;
- an uptrend on a lower timeframe.
Both trend lines, with a small margin of error, hit the point where, according to all the rules, it is possible to make a purchase. Will this purchase be justified? From the point of view of the trend, of course. Moreover, remembering the rule Trend is your friend, you should not be afraid at all, because even visually you can see that the trend is upward.
But, if everything were so simple, no one would know about the crying, bankrupt traders. All as one would be millionaires.
After opening a purchase in the place indicated by a red circle, the price continued to fall and did not come back. It turns out that not everything is so simple. It is not enough to be able to correctly determine the direction of the trend, do you need to know something else?
5 important points before trading with the trend
Rule 1. Each timeframe has its own trend
There are 9 main timeframes:
- M1 - minute timeframe;
- M5 - five minute timeframe;
- M15 - fifteen minute timeframe;
- M30 - thirty minute timeframe;
- H1 - hourly timeframe;
- H4 - four-hour timeframe;
- D1 - daily timeframe;
- W1 - weekly timeframe;
- MN - monthly timeframe.
Each schedule lives its own life. There may be an uptrend on H1, a downtrend on M5.
Comparison of one timeframe with another can both help in trading (there are a lot of trading strategies, the most popular of which is Elder's Three Screens), or interfere and confuse.
My advice: if you are already experienced and understand what you are doing, then analyze the chart on all timeframes, if you are a beginner and do not feel enough knowledge in yourself, I advise you to choose some one TF and, without switching from it, analyze the charts.
Rule 2. Trade with the trend for disciplined traders
Firstly, no matter what anyone says, trading is not the easiest thing to do. The trader is under constant stress, good if controlled, and much worse if uncontrolled.
Remember yourself, at the moment when you need to open a deal, two completely different people wake up in you: one says it's time to open a deal, the second dissuades and provokes to wait until there is a clearer picture.
When trading with a trend, discipline must come first. A deal came up, open it. There is no time to wait for an improved situation. Either now or never. It is worth delaying a little and the risk / reward ratio will change its value, after which it will not be profitable to risk money.
Secondly, trading with a trend implies a wait-and-see nature. There will be no scalper entries here, and patterns for entering a trade will not appear every 5 minutes.
Trading with the trend implies the tactics: "Open a deal, hold it!" You can't take 10 pp and get out of the position, because the next one won't be soon.
Will in a fist, if the strategy says you need to keep, then you need to keep. Thoughts like: "And this is enough for me" are not allowed. You can take too little profit, which is not enough for life, so even in the next transaction, these points can be used to pay for the stop loss.
Rule 3. Trade What You See, Don't Hear
A very important rule applies not only to trend trading, but also to all other methods. You don't have to go far. I wake up today, took the kids to the garden, have breakfast and watch financial news on TV.
"The EURUSD pair has finally entered its uptrend and this is for a long time. The trend has been formed, there can be no two opinions here." And so on and so forth.
I open a chart of the EURUSD pair, and I see that a sell position is peaking.
Did the TV analyst cheat? I do not think. It's just that our positions are too different. He looks at the charts more globally and analyzes where possible the price will be in two months. He does not say how much the steam can sink, the end mark is important to him.
Well, if it does not reach the analyzed price, there will be many more reasons why this happened. The fact remains that the TV analyst, unlike you, does not risk anything. We chatted and ran away.
Therefore, in no case listen to ANYONE. Trading is intimate. Develop your strategy and analyze the chart yourself. Since you have learned how to build a trend, perhaps no one knows how to build, and if so, you should only be interested in your signals.
Rule 4. Diversification in the Forex market
Most likely, I will refer this rule to beginners, although sometimes I myself would not be bad to listen to it.
What is diversification, I think there is no need to explain, but if you do not know, refer to Wikipedia. Diversification is good for portfolio trading. Take a little of this, a little of that. Someone will go down, someone will work. Ultimately there must be a plus.
I'm not talking about much else here. You shouldn't trade all strategies at the same time. Taken to trade with the trend, ignore other strategies.
Professionals have been practicing the same entry for years and do not focus on another. And it is right. If some pattern is clearly understood, tested, you know all the tricks that it can present, and besides, it brings money, so why use something else?
The idea behind this rule is to trade with the trend, so hammer this topic until you turn blue in the face. Study it from all sides. Achieve a level of skill so that you will not be surprised at the opening of the next deal.
Rule 5.7 measure, cut once
This rule suggests itself. You should never rush. The market was yesterday, is today and will be tomorrow. And your deposit was yesterday, is today, but tomorrow it may not be there anymore.
I used to disregard this rule and keep everything in my head. But after reading clever books on the psychology of a trader, I came to the conclusion that it is best to draw up an action plan point by point. The position came up, I open my plan and mark the points. For example, point 1, completed, point 2, completed, point 3 ..... and so on. If everything is correct, all points are met, I open a position.
Say: "Is it too long to recheck all the points?"
Analyzing my deals, I came to the conclusion that the market gives me about 2 - 3 minutes to think. This time, unless of course poking your nose, is quite enough to make a deliberate decision according to the scheme proposed above.
Practical application of trend trading methods
To start trading with a trend in the Forex market or any other exchange, the first thing to do is to determine the trend of the movement. As mentioned above, there are only two trends: an uptrend and a downtrend.
The easiest way to determine the market trend is to use the trend lines that are available in any trading terminal. If the trend line is directed upwards, then there is an uptrend, if downwards, then there is a downtrend.
In addition, indicators can come to the aid of a trader. For example, the most common trend indicator is called Moving Average. Depending on the direction in which we are looking at the indicator, we determine the presence of a trend.
The logic is the same as with trend lines, if the indicator looks down, then we are dealing with a downtrend, if up, then with an upward trend.
Let's figure out how to trade with the trend using popular methods.
How to trade with the trend with specific lines
The trend line is a pretty tricky tool. For all its simplicity, it would seem that a line is a line, it can be laid in completely different ways and, accordingly, you can get completely different results.
To ensure that the result is always the same, I suggest studying the article Trend Line | How to plot trend lines and use in Forex, in which I have listed several popular methods of plotting a trend line. Learn the way you like and apply only it. There will be less confusion.
The question remains, how to trade with the trend? Go anywhere? Dangerous, it was written about it above. So a smarter way is needed.
You need to enter only from the trend or as close as possible to the trend at the moment the price reacts to it. If you miss the moment, the price may run away and you will have to set a stop loss that violates the principles of money management. What you shouldn't do at all.
Suppose we have identified a trend, what to do next, we will figure it out on the screen.
The screenshot shows an uptrend. When the price approached the trend line, a reaction appeared in the form of a Bullish Engulfing candlestick pattern. We enter along the trend with a stop below the Low.
You can use different options for take. The most common is to postpone the trend by highs, thereby obtaining a trading channel and close the deal at its upper border, or measure waves.
Strategies for trading with the trend
There are a lot of trend strategies. Basically, they are all designed to enter the market by touch. For example, if we take a strategy based on moving averages, you will need to enter a position at the moment the price touches the indicator.
I like the strategy based on trend lines more and I think the best strategy is called "Third Touch".
How to trade with the trend. Early entry strategy.
A pattern for entering the market appears at the very beginning of an incipient trend, thereby increasing the potential from a trade. I like early entries because it not only increases profits, but also significantly reduces losses.
To implement a buy entry using a strategy, you need:
- The presence of a downtrend.
- Breakout of the last local maximum.
- The minimums should no longer be updated.
- After a new breakout of the maximum, we draw a trend line.
- We are waiting for the price for the third touch to the trend line.
This strategy involves entering a deal using pending orders. StopLoss is set below point 2, takeprofit is calculated either by wavelength or using channels.
Hopefully with early entry everything is clear. We identify the trend and wait for it to be broken. At the first signs, we go at the beginning of an emerging trend, and then, if everything was analyzed correctly, we earn, if an error crept into the calculations, we will get a stop.
How to trade with the trend. Addition strategy.
There are cases when either we are late with the entry at the best price or we just want to add to an existing position. It should be warned that this method is intended for more experienced traders who are able to compare information from different timeframes and not get confused in it.
On the screen I depicted the beginning of the trend. The example is not the most obvious. In this case, it turns out that we did not add to the existing position, but opened a new one, but I think the idea is clear.
After the opening of the main position on the working TF takes place, you should go to the TF of the younger period, and if there are similar conditions for entering a deal using the Third Touch strategy, add the volume.
That's all for me. The information provided should show you how to correctly trade with the trend in Forex and any other market where you trade. Until new articles. I look forward to your comments.
Part # 1: THEORY
Today I will tell you how trade binary options applying the strategy “ Against the trend". More recently, I published a similar Trading Strategy "Following the Trend". You can familiarize yourself with it and understand what a trend is, how to analyze the movement of an asset's value, and most importantly, how to make money on it.
Both strategies are easy to use and profitable. One has only to figure out in which cases to trade “Following the trend”, and in which “Against the trend”.
Trade " By trend»Is beneficial when the trend is clear, it is strongly expressed on the chart. The price fluctuation is stable in a certain range, and its upper and lower boundaries are close to each other.
Trade " Against the trend»Beneficial when the trend is not very pronounced. The asset price also fluctuates within a certain range, but its borders are located at a distance from each other.
There is such a thing as "reversal", that is, after a long or sharp upward movement (for example, after the news of the economic calendar), the value of the asset changes direction and begins to move downward. Or vice versa. Therefore, in an uptrend, it is necessary to catch the maximum upper point and put it on a decline. And in a downtrend, catch the lowest point (as they say "bottom") and put on an increase.
On the chart, you can see that after a sharp drop downward, the value of Apple's stock reversed and began to rise. After waiting for the lowest point, open an option to raise and then calculate the profit.
Part # 2: PRACTICE
1) I open the platform of my broker uTrader;
2) one by one I open available assets and look where there were significant upward or downward jumps in relation to the general trend;
3) that's what caught my eye. Significant growth of USD against RUB in a fairly short period of time. From experience I know that if it has grown so sharply, then soon the trend may turn around and go down;
4) I opened Live Chart to check the information. I chose the currency pair I was interested in and turned on the Linear Regression indicator. I chose 15-minute candles.
The screenshot shows that the general trend in the value of the asset is downward. And after a significant increase, the trend will still go down. Therefore, without hesitation, I opened an option for a fall, for the near future, which was offered by the broker.
And after 30 minutes I received $ 72 net profit from one deal.
This strategy is best applied to options. no more than 30 minutes... And try to open deals in the direction of the general trend of the price channel. The Linear Regression indicator will help you determine it. To make your forecast as correct as possible, I advise you to combine this strategy with the Pivot Points Trading Strategy and the Trading Signals Trading Strategy.
You can familiarize yourself with other strategies recommended by me in the article Binary Options Trading Strategies (full list). For those who wish there are
It is very difficult to find a black cat in a dark room.
Especially if she's not there.
Confucius
In the previous article, we examined the next step - trading against the trend. Agree, the very phrase “trading against the trend” sounds rather strange, it hurts the ear. It's like driving in the opposite direction. Is it really possible? It turns out that it is possible, and with the proper professional level, this one brings good profit. But first things first.
Remembering the theory
We already know that a trend is a directional price movement. Trends are conventionally divided into: short-term (days), medium-term (weeks, sometimes months) and long-term (years). For example, throughout 2017 there was a pronounced bullish trend on EURUSD (this does not happen every year). However, in the same bullish year, there were quite a few bearish days, bearish weeks, and three bearish months (February, September and October) when the price went down. Can't we sit for three months without work?
The essence of trading against the trend is not to miss these powerful moves against the main trend, to make them work for us, to make a profit. It's not as difficult as it sounds.
For this we must:
- recognize a long-term trend and
- work against it on pullbacks, i.e. follow the medium-term (or short-term, as appropriate) trend.
Keeping pace with the market
The market cannot constantly move in one direction (otherwise everyone who guessed the desired trend would be a millionaire), it inevitably rolls back a little against the main trend, then goes forward again. Figuratively, this can be expressed as follows: a person takes two, three or four steps forward, one back, then three steps forward - two back, then forward again, and so on without end. It is at this “reverse step” that we catch the market.
What is the main difficulty of this trading system? The fact that trends always reverse without warning, sometimes almost instantly (and sometimes without them), sometimes a little more slowly, but still - no one warns anyone. You need to see, think and act yourself.
So, we figured out that it is correct to call “trading against the trend” “trading against the main trend in the short- or medium-term trend”. Again:
- Identified the main trend
- We clearly understand that he cannot move forever in one direction,
- We waited for a rollback and took a profit on it.
Everything, there is nothing else. Only in this way, consciously, and not "running" after the market, reacting to every fluctuation.
For clarity, we have opened a terminal, you can also open a demo account there to test your tactics.
Black cat in the dark room of the market
It is important not to confuse trading against the trend with the favorite pastime of many generations of investors and traders - searching on charts. On history (historical data, archive of quotes) this is a completely harmless thing: "Here is the bottom ... but the top ... if I opened here, then it would ... and if I closed here, then the profit would be such and such ...". In real trading, these searches can end in ruin. The “top” you find will turn out to be a normal correction, and the price will continue to move up. The "bottom" you find in some "third under the fifth wave of Elliot" will only be a stop in a long way down ... Do not look for black cats, act consciously.
Condition for success
The ability to "roll over" becomes vital for this trading system (and for all trading in general). exit from an obviously unprofitable position, stopping losses, and open in the direction that is profitable. Technically - no hassle, just a few clicks in. Psychologically, it is a huge challenge for many, especially novice traders. We will talk about this in a separate article.
How to trade against the trend
To make your trading on this trading system effective, as indicated in our article:
Buying a CALL option
In order to buy a CALL option using a counter-trend trading strategy, you must:
1. From the list of currency pairs presented, select a pair with a long-term bearish trend;
2. Choose the moment when the short-term trend will go against the long-term one, i.e. “Catch” a bullish trend (a good signal is a breakdown of the daily high of the price);
3. Buy a CALL option and exit the market by taking profit:
Buying a PUT option
In order to buy a PUT option using a counter-trend trading strategy, you need to:
1. From the list presented by the broker, select a pair with a long-term bullish trend;
2. Choose the moment when the short-term trend will go against the long-term one, i.e. “Catch” a bearish trend (a good signal is a breakdown of the daily low of the price);
3. Buy a PUT option and exit the market by taking profit:
- Trading against the trend requires a higher professional level than, for example, discussed earlier. You cannot leave it to chance, it requires increased attention, i.e. time. If, when trading with a trend, it is even useful to sometimes turn off the terminal and calmly let the profit flow, then this will not work against the trend. You are obliged to constantly “keep abreast” of the current one.
- The above (increased attention) should not be expressed in fussiness, these are different things. One of the first signs of being professional, that you already understand something about the markets, is the realization that prices that seem to move very quickly are actually moving slowly. Don't fuss. If you act correctly and obey, you will have ample time to roll over.
- Learn to "roll over" on a demo account, ideally you need to bring this useful skill to automatism. Online, on different currency pairs, on powerful movements (they often happen) - open against the trend, with a significant price movement in the opposite direction (for example, 150 points) - open along the trend, gradually reducing losing positions until they are liquidated.
- Do not try to monetize, make a profit, at every market fluctuation, you will not succeed. Taking a part of the profit on an obvious trend is our task, quite real.
Real trading with broker Finmax
In order to buy a CALL option, follow the steps below by going to the website
In this article, we will analyze the main subtleties of trading against the trend, and find out if it is worth doing it at all. This topic is important, because most of the losses are due to the fact that traders clumsily trade against the trend.
Trading against the trend: essence and highlights
As we know a trend is a directional price movement, an uptrend is present in the market when each high is above the previous high, and a downtrend is when every low is below the previous low.
To begin with, we determine what trend exists in the market, before doing this it is necessary to determine the time frame, better even a few. So, when the trend is upward, prices are growing, it is preferable to open deals only to buy, when the trend is downtrend and prices are falling, it is advisable to open deals to sell. In other words, when prices rise, then bulls make money, since the trend is bullish, and when prices fall, bears make money, because the trend is bearish, with sideways price movement (flat), everyone loses money. Opening a position with a trend allows us to earn more with the least risk.
You can, of course, work against the trend, selling in an upward market, or open buy deals on a downtrend, but in this case the trader bears significant risks. In essence, trading against the trend is driving on a one-way road, against the movement of other participants.
Types of trading against the trend
Trading against the trend can be carried out even though the risks are greater and the potential profit is less.
There are 2 types of counter trend trading:
- Trading on pullbacks
- Channel trading
Pullback trading is based on the price return to moving averages. Pullbacks or corrections usually occur after sharp trend movements. This can happen after significant events or important news releases. Such trading is often used by scalpers, because most of their transactions are completed in a few minutes.
As for trading in the channel, in order to use it, it is enough to build resistance and support lines, in combination with which the Stochastic is often used, in this case, observing this indicator and ignoring the direction of the trend, we make deals depending on where it is. is in the oversold or overbought zone.
When is it worth entering the market when trading against the trend? To begin with, before our entry, there must be a strong movement in the market, in other words, there must be a long and continuous trend that would move up or down. Second, you might want to consider entering a trade if a double top is present. Also look at what happened to the price some time ago, if the price went up and now has no support and it seems to be hanging in the air. If you notice such moments, then entering the market will be reasonable.