For illustrative purposes only. Past performance does not guarantee future results. If a stock is rising, a rising RSI could confirm the price trend. Other indicators such as stochastic oscillators can help identify potential contrarian opportunities across various time frames—hourly charts for the more active trader, weekly charts for the longer-term investor, and so on. There are also many chart patterns that identify a topping pattern such as head and shoulders, double tops, or triple tops.

In figure 2, you can see an example of a double-top pattern. The move to the second top lost strength and the stock price declined and broke below the support level yellow horizontal line.

Chart source: The thinkorswim platform. You can see from the chart that price looked like it might take out that first top but failed. And when price broke below the support level, prices declined even further. Charts are one way to analyze crowd behavior, but indicators and patterns tend to be lagging.

News reports could drastically impact price movement. How the market reacts to news may be more important than the news itself. If a market shrugs off bad news and keeps rallying, that could be a sign of a strong trend. If a market sells off or fails to advance on good news, it could signal that a bull market is getting tired.

Not investment advice, or a recommendation of any security, strategy, or account type. Contrarian traders try to take advantage of moments when the markets get carried away by strong momentum. When everyone and his grandma is ready and willing to push prices higher, it can sometimes lead to overpriced assets. Likewise, when everyone is hell-bent on selling an asset, opportunities to buy at a bargain arise.

One of the main benefits of contrarian trading is that it allows you to get good prices and catch reversals right as they begin. In turn, this often leads to very attractive reward-to-risk ratios , giving you more bang for your buck. When a trend is particularly strong, it can bust right throw potential reversal points and wash away those who go against the flow.

By no means am I saying that you should go against the trend just for the heck of it. To think we are able is almost to be so; to determine upon attainment is frequently attainment itself; earnest resolution has often seemed to have about it almost a savor of omnipotence. If we scroll our chart a bit, what will we see? Was there such top before? There was not, it is dangerous to enter now.

And there is no such level on the weekly chart. If the level that we have marked was there on the weekly chart, the entry would have been more justified. But there is no the level on the weekly chart, so we work with what we have. So, I have listed you some of the signs of a good entry against the trend.

But even these signs are not enough sometimes because such signs as a long candlesticks, space to the left, the presence of any good for entry setup — all this does not give us full confidence, as the price may continue moving.

First, you should wait for all those signs I mentioned earlier. And in addition, you should wait until the price emerges High at least twice in a row at the same level. In this case, we can see it on this chart. The price reaches almost one level. The sell price is 1, The price should not reach one and the same point. It is enough when it knocks out in the narrow limits of two or three pips plus or minus.

And when you see that sell price is in the same point for several days in a row, i. This is a sign that the trend slowed down at least and there will be a correction at least. Because on the daily charts in order to keep the price below the certain level and sell from this level, again and again, you need a lot of assets and a lot of resources. This means that the strong player is in the market.

Therefore, in the case of the strong long trend, we wait until the price knocked out from one price level at least twice, and enter after that only. Moreover, it is best to enter near this level. And you should enter, of course, with a pending order. Here the candlestick emerged and it reached the price of 1, Another candlestick emerged, and it reached the same price for a couple of pips below.

What does it mean? This means that we have built a new level of which may be more sell trades. After we closed the second candlestick that knocked out from the same point with High we put the pending order Sell Limit nearby the level. Remember, the price knocked out from the level of 1, , so we put on 1, We put the pending order Sell Limit, as the price at the moment of closing the Doji is below the price we want to enter with.

And stop loss is just above the level. At about the same distance at which we entered below the level, at the same distance above the level, we put the stop loss. In this case, the nearest obvious level is far.

Therefore, you can keep or you can secure yourself and just increase the stop loss 4 times. In this case, our stop loss is pips. We get pips. But as you can see, the price has reached this level. Our Take-profit would have been taken in this case. And the deal would have closed with a profit four times greater than this stop loss. In case if we had the level here, then we could enter easier: at the setup, at the Pin-bar, that would have the reference level. In the case when there is no the level, we wait until it is formed, that is when the price reaches some price mark twice.

These bars may not necessarily go in a row. There might be one or two candlesticks between them. Would wait for Low of two candlesticks reach approximately the same level. This would mean that big seller buys from this level. Also, if we enter at the set-up level against the trend, the stop loss would be according to the rules of setup. You can enter from the level of the previous day.

You can take the level of the high point or low point of the previous daily candlestick during Day Trading, monitor the levels for the Daily Charts, and take the average daily range volatility as a goal or simply close the deal at the end of the American session, i. What do I mean when I say to take the average daily range as a goal? This is the medium size of candlestick from High to Low of this currency pair.

That is, if the average size of the candlestick from high to low is, say, pips, and the price has passed 80, it is natural to close the deal as the probability is very, very small that it will pass a large number of pips.

How can we determine the average daily range — volatility? There is the average range of candlesticks from High to Low here, even by the hour, calculated for the last 10 weeks. Also, there is the average daily range from high to low in different days of the week. Here on Wednesday, we had on average ,4 pips for the last 10 weeks. This number of pips the price on average passes from High to Low. An average of ,7 pips is on Thursday, ,3 pips — on Friday, 79,2 pips — on Tuesday.

Accordingly, if the price has already passed pips since the beginning of the day, it is meaningless to open some new positions and go in the direction, where the price moved.

And it is pointless to expect any bigger profits too. It is better to close the trade. When you trade Daily Trading, consider these data. This is a good moment to enter. When the candlestick with such a long tail closed, you can enter immediately.

Because it means that traders buy or sell intensively and there will be the momentum down. It always happens after such candlesticks, as a rule. You can be in such trade little longer. Not even to the nearest level, but up to the next level. And you can get very, very good profit.

Because of everyone will enter here. As there are still spikes when marker makers try to knock out those who entered at this tail. It is necessary to put a big stop here, but the profit can often be very large also.

Strong spike upward against the trend, you would have entered at the moment of close of the candlestick and then the price went down. You could wait until the nearest level and the next level also. It would probably be the best option to wait until the next level. Here you could get pips, it is very, very good on the H4. There was a strong movement down on the same chart, and then the price stopped.

Once we see that the price stopped, it is an indication that you have to prepare. Thus, the candlesticks should be large, large size compared to the previous ones. Compared to the average size of the candlesticks in this chart, this timeframe and this currency pair. That is, the candlesticks should stand out in the chart. For example, like this candlestick here:. If there is some movement, trend movement as you think and you are going to enter, but you see other candlesticks to the left, it is not a trend, but range most likely.

But if these candlesticks are far enough away from your potential entry, then the trend is not very strong here and the entry is not justified. It turns out to be not a range, and not against the trend, but it is not clear what it is.

As they say, the market decides where it wants to go. In such situations, it is better to refrain from the entry and wait until the movement will show itself. Thirdly , you can consider entering the trade, if there is a Double top. If the previous top was not so far away, or it was far away, but in this case, it would no longer be a double top, but the reaching of the level. For example, as it is in this chart.

Therefore, there is no any reliance on the level here. But if there is no reliance on the level, it is dangerous for entry. Yes, there are, if the price reaches any level.

Often, especially for those who trade within the day, it is useful to go to the timeframe above and see what happens there.

Here we have daily charts. On the weekly charts, we have long candlesticks; there is a space on the left, clear uptrend and Pin-bar. If we scroll our chart a bit, what will we see? Was there such top before? There was not, it is dangerous to enter now. And there is no such level on the weekly chart.

If the level that we have marked was there on the weekly chart, the entry would have been more justified. But there is no the level on the weekly chart, so we work with what we have. So, I have listed you some of the signs of a good entry against the trend.

But even these signs are not enough sometimes because such signs as a long candlesticks, space to the left, the presence of any good for entry setup — all this does not give us full confidence, as the price may continue moving.

First, you should wait for all those signs I mentioned earlier. And in addition, you should wait until the price emerges High at least twice in a row at the same level. In this case, we can see it on this chart. The price reaches almost one level. The sell price is 1, The price should not reach one and the same point. It is enough when it knocks out in the narrow limits of two or three pips plus or minus.

And when you see that sell price is in the same point for several days in a row, i. the price is not allowed to go upward; it is an indication that you can enter the trade. This is a sign that the trend slowed down at least and there will be a correction at least. Because on the daily charts in order to keep the price below the certain level and sell from this level, again and again, you need a lot of assets and a lot of resources.

This means that the strong player is in the market. Therefore, in the case of the strong long trend, we wait until the price knocked out from one price level at least twice, and enter after that only.

Moreover, it is best to enter near this level. And you should enter, of course, with a pending order. Here the candlestick emerged and it reached the price of 1, Another candlestick emerged, and it reached the same price for a couple of pips below.

What does it mean? This means that we have built a new level of which may be more sell trades. After we closed the second candlestick that knocked out from the same point with High we put the pending order Sell Limit nearby the level. Remember, the price knocked out from the level of 1, , so we put on 1, We put the pending order Sell Limit, as the price at the moment of closing the Doji is below the price we want to enter with.

And stop loss is just above the level. At about the same distance at which we entered below the level, at the same distance above the level, we put the stop loss. In this case, the nearest obvious level is far. Therefore, you can keep or you can secure yourself and just increase the stop loss 4 times.

In this case, our stop loss is pips. We get pips. But as you can see, the price has reached this level. Our Take-profit would have been taken in this case. And the deal would have closed with a profit four times greater than this stop loss. In case if we had the level here, then we could enter easier: at the setup, at the Pin-bar, that would have the reference level. In the case when there is no the level, we wait until it is formed, that is when the price reaches some price mark twice.

These bars may not necessarily go in a row. There might be one or two candlesticks between them. Would wait for Low of two candlesticks reach approximately the same level. This would mean that big seller buys from this level. Also, if we enter at the set-up level against the trend, the stop loss would be according to the rules of setup.

You can enter from the level of the previous day. You can take the level of the high point or low point of the previous daily candlestick during Day Trading, monitor the levels for the Daily Charts, and take the average daily range volatility as a goal or simply close the deal at the end of the American session, i.

What do I mean when I say to take the average daily range as a goal? This is the medium size of candlestick from High to Low of this currency pair. That is, if the average size of the candlestick from high to low is, say, pips, and the price has passed 80, it is natural to close the deal as the probability is very, very small that it will pass a large number of pips.

How can we determine the average daily range — volatility? There is the average range of candlesticks from High to Low here, even by the hour, calculated for the last 10 weeks.

Also, there is the average daily range from high to low in different days of the week. Here on Wednesday, we had on average ,4 pips for the last 10 weeks. This number of pips the price on average passes from High to Low. An average of ,7 pips is on Thursday, ,3 pips — on Friday, 79,2 pips — on Tuesday. Accordingly, if the price has already passed pips since the beginning of the day, it is meaningless to open some new positions and go in the direction, where the price moved.

And it is pointless to expect any bigger profits too. It is better to close the trade. When you trade Daily Trading, consider these data. This is a good moment to enter. When the candlestick with such a long tail closed, you can enter immediately.

Because it means that traders buy or sell intensively and there will be the momentum down. It always happens after such candlesticks, as a rule. You can be in such trade little longer. Not even to the nearest level, but up to the next level. And you can get very, very good profit. Because of everyone will enter here. As there are still spikes when marker makers try to knock out those who entered at this tail.

It is necessary to put a big stop here, but the profit can often be very large also. Strong spike upward against the trend, you would have entered at the moment of close of the candlestick and then the price went down. You could wait until the nearest level and the next level also. It would probably be the best option to wait until the next level. Here you could get pips, it is very, very good on the H4.

There was a strong movement down on the same chart, and then the price stopped. Once we see that the price stopped, it is an indication that you have to prepare. Here it knocked out from one level three times. After this Doji, we could put pending order buy limit. Almost at the same price Low of this tailed candlestick, then Low of this small one, and the next. And we could enter on this Doji. Stop-loss is just below the level that is approximately at the same distance, where the pending order is.

As we can see, the price made a false breakdown, bar left this price border. But the stop was not affected, and the price went upward again.

Hello, ladies and gentlemen. So can we trade against the trend? And if we can, how should we do it right? Today we will talk about trading against the trend. It is dangerous to trade against the trend; it leads to losses very often. But there are situations when you really want to get into the trade, although it is against the trend. Overall, I would not recommend you trade against the prevailing movement. But if there is a situation when you really want to enter into a trade, then do it right at least.

It seems that the entry against the trend will be very, very profitable. But the fact is that we lose sight of the moments when the price has already been moving up for some time, some setups have emerged, but as a result of continued movement in the same direction. And if we entered against the trend, we would have lost a lot of pips and real money accordingly.

Here we see a chart of the USDCAD currency pair. What do we see? There was uptrend for quite a long time. It would seem that the price has increased dramatically. There were long white candles, after which correction occurs most often.

And Pin-bar emerges. It would seem that it worth to open sell trade. So… Another strong bar upward emerges. We have another bar. Then another quiet long bar upward. And the setup of Pin-bar emerges. Most traders will think that now then definitely it is time to sell! Many traders lose their deposits exactly in such situations.

Because what happens next is not the movement, which they expected… A setup of Doji down emerges. If you were using pending orders i. you set a pending sell order just below the low point of our Pin-bar, then sell would be activated.

So, you are in the market now. But what does await you: profit or loss? Price just went up. We are waiting. Here is another neutral candle. And here is another pin-bar behind it.

It triggered out our stop-loss. Some traders increase their lot in the confidence that now will definitely be a strong movement down. Can the price increase indefinitely after all? And here is another Pin-bar setup. There emerges a bullish candlestick the next day.

The price grows by another pips and another Pin-bar emerges then. Because how much can pin-bars emerge? A powerful rollback will definitely happen now! Price went down slightly. If we had entered with a pending order, it would be activated now. The neutral bar goes further. Because, when we look at the history on the chart, that has now passed, we pay attention to the extremum only. Only to it. But all the setups, as they are the extremum, are profitable, of course. The price really went down after the Doji.

But the point is that the price can rise for a very, very long time. Moreover, it can go without corrections also. Also, one should distinguish between trade against the trend when there is a clear trend, and you are trading against him, trying to enter the market against the trend from trading in the range. That is when there is no clear movement, any general uptrend or downtrend, but there are zigzag movements.

Well, as it is here, for example:. When the trend is unclear, when it is unclear if the bulls or bears prevail now, we trade as usual as if we were trading with the trend, but we set more modest goals. That is, we trade from level to level, as it is unknown in the case of the range where the price will go. Therefore, acting under conditions of uncertainty, we set small goals: we enter the deal, and our goal is the next level.

We trade from level to level the most closely; do not hold the position for a long period of time. It is more dangerous to trade in range than to trade with the trend, but it is less dangerous than to trade against the trend.

First , our entry should be preceded by a strong movement, as it is in the disassembled example of USDCAD pair. That is, there should be long and strong uptrend or downtrend. Thus, the candlesticks should be large, large size compared to the previous ones. Compared to the average size of the candlesticks in this chart, this timeframe and this currency pair. That is, the candlesticks should stand out in the chart. For example, like this candlestick here:. If there is some movement, trend movement as you think and you are going to enter, but you see other candlesticks to the left, it is not a trend, but range most likely.

But if these candlesticks are far enough away from your potential entry, then the trend is not very strong here and the entry is not justified. It turns out to be not a range, and not against the trend, but it is not clear what it is. As they say, the market decides where it wants to go. In such situations, it is better to refrain from the entry and wait until the movement will show itself.

Thirdly , you can consider entering the trade, if there is a Double top. If the previous top was not so far away, or it was far away, but in this case, it would no longer be a double top, but the reaching of the level. For example, as it is in this chart. Therefore, there is no any reliance on the level here.

But if there is no reliance on the level, it is dangerous for entry. Yes, there are, if the price reaches any level. Often, especially for those who trade within the day, it is useful to go to the timeframe above and see what happens there. Here we have daily charts. On the weekly charts, we have long candlesticks; there is a space on the left, clear uptrend and Pin-bar. If we scroll our chart a bit, what will we see?

Was there such top before? There was not, it is dangerous to enter now. And there is no such level on the weekly chart. If the level that we have marked was there on the weekly chart, the entry would have been more justified. But there is no the level on the weekly chart, so we work with what we have.

So, I have listed you some of the signs of a good entry against the trend. But even these signs are not enough sometimes because such signs as a long candlesticks, space to the left, the presence of any good for entry setup — all this does not give us full confidence, as the price may continue moving.

First, you should wait for all those signs I mentioned earlier. And in addition, you should wait until the price emerges High at least twice in a row at the same level. In this case, we can see it on this chart. The price reaches almost one level. The sell price is 1, The price should not reach one and the same point. It is enough when it knocks out in the narrow limits of two or three pips plus or minus. And when you see that sell price is in the same point for several days in a row, i.

the price is not allowed to go upward; it is an indication that you can enter the trade. This is a sign that the trend slowed down at least and there will be a correction at least. Because on the daily charts in order to keep the price below the certain level and sell from this level, again and again, you need a lot of assets and a lot of resources.

This means that the strong player is in the market. Therefore, in the case of the strong long trend, we wait until the price knocked out from one price level at least twice, and enter after that only.

But there are situations when you really want to get into the trade, although it is against the trend. Your Practice. The arrow indicates where the short-term moving average is turning up. Therefore, you can keep or you can secure yourself and just increase the stop loss 4 times. When a trend is particularly strong, it can bust right throw potential reversal points and wash away those who go against the flow. Moreover, you do not want to enter a trade based on probability alone, especially, when you know you are trading against the trend! Lots of it.

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