TraderMaker

There are many reasons out there why newbie traders lose money and one of them is based on the fact that cannot break the desire to counter trend trade or try to pick tops and bottoms. It would be foolish to try to pick tops and bottoms except price are in what I would describe as a “trading range”. You can on a longer term trend when the market looks like it wants to change its direction.

Just as the markets trend seems to be failing and ending, the best entries is just by the corner. Trading against the surge of price action can be very fearful and risky. The basic reason is that you are going against the crowd, the dynamics and the development. The one thing that we must know about any move in any direction in the forex market will always come to an end. All the price actions that we experience in the currency market whether up or down, would eventually turn for a short move in the reverse direction and continue in that path or reverse totally in the same direction and move in the reverse direction or a sideways jumping.

As investors there are a lot of ways to prove if a setup is ready for a counter trend method. One of such ways is to get technical indicators that depict overbought and oversold conditions. You might decide to go for an oscillator; it analyzes prices action via the use of lines that move from 0-100 depending on what price is represented. The oscillator is set closer to 0 and we are in a situation of an oversold condition and when the oscillator approaches 100, we have a huge tendency of having an overbought condition .

Some of the technical indicators that best describe the oversold and overbought conditions include RSI (Relative Strength Index), Stochastic. These indicators are by their lines representing the zones which are constantly fluctuating. One of the disturbing features of these indicators just like the any other technical indicator is the fact that although they show you a possible overbought or oversold condition, there’s no guarantee prices will be reversed.

In a clear scenario, we find most traders fall a prey to what we find in the market quite often; we see the market go in your favor just in about some few ticks of movement in the right direction after entering. Sometimes if not immediately, they occur soon after, the market then suddenly hit a brick wall and starts heading back up. What just have a bearish outlook is now very bullish and is not just doing that but racing into forming another new high and this gets you stocked out with your stop loss. If this sounds familiar, then you should be aware that it happens to many traders, as well as advanced traders that really should be better informed.

Conclusion

Finally, counter trend trading is a very risky preposition and I advise you to avoid it if you can. But if you must, look for the bottoms in a move and a long trade, you’ll be happier with the results and you trading will become.