In today faq, we will be looking into an interesting question about trading against the trend from one of our fellow trader.
Below is the question:
They say that you should never trade against the trend, but after following this faithfully I have found that money can be made trading against the trend. What do you say?
I must say that trading against the trend is not impossible, but I think that it is for those traders who are more experience. For a new trader, I will always suggest you to trade with the trend as it will be easier to trade than against the trend.
The problem with trading against the trend lies in your ability to identity when the price is going to reverse. Let says that you are seeing a down trend and suddenly the price started to move up. For a new trader, they tend to think that the price is going to reverse and start to enter a LONG trade.
After a few candles, the price started to move down and stop them out as the price is actually retracing and not reversing. Although there are ways to identify whether the price is going to retrace or reverse, it does take some experience to get it right most of the time.
For example, you have identified that there is a reversal on the 15 minutes chart but on the higher time frame like the hourly or 4 hourly chart, it is actually on a retracement. As a new trader, you will need some time to know how to gel all these information on different time frames up to get a clear picture of the market movement.
Therefore my personal opinion on the above question is it is better for those of you who are new to trading to trade in the direction of the trend. Once you have gained enough experience in trading like 2 to 3 years, you can consider trading against the trend as another strategy.