Is counter trend trading a disease?

Been there (more than once), done that (more often than I care to admit) and am not going back. The first order of business as you watch a trend that you're not in (or not as heavily in as you should be) is to observe the move in the hope of finding a setup and trade location that allowsyou to be a part of the continuation.

It takes a special breed to make counter trend trading work. I'm not suggesting that it is not a valid approach nor am I suggesting you can't get rich doing it. But I am suggesting that you better have a better plan than quickly jumping on stalled trends in the hope they are spent. Too many of them will continue. My impression is that good counter trend traders are content with scalps and figure out how to have a high percentage of small wins.

Quote from NoDoji:

Consolidation after a strong push in a defined trend is far more often than not the ideal entry for a measured move in the same direction, which is a price move at least equal to the previous move.

The odds are especially favorable if the consolidation occurs in a narrow range (flag or channel) or triangle formation.

http://chart-patterns.netfirms.com/continuation.htm

Narrow range consolidation lures in inexperienced counter-trend traders, who believe it's a reversal signal of weakness in an up trend or strength in a down trend. If they don't scalp a few ticks, their stops get triggered, adding fuel to the breakout.
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Miss too many valid with trend entries -- consolidations, second legs etc. -- and your chances of being a profitable trader become nill. Being fixated on the upcoming counter trend (yes, we all know it will come ... at some point) frequently results in missed wth trend entries.

Best practice? Don't do that!!

Or at least don't do that just to catch a few ticks. If there is a real trend reversal go with the new trend once you believe in it. If you had to pick one difference between winning traders and all the rest it might well believe that the winners understand that strong trends, once established, can and do last much longer than most of us think possible.

Quote from RedTankEra:

The biggest challenge for counter-traders is not getting to the mean, but not missing the easy trade, which is the trend resumption, if any.

In other words, if you counter trade but you tend to miss the trend trade, you doing it wrong and this is what typically happens with inexperienced traders; they get lost trying to obtain a profit in the counter-trade, and as they waited they missed the entry with the trend.

First and foremost, you want to make sure you don't miss the easy trend trades, and then, and only then incorporate counter trend trading techniques and setups that won't interfere with your trend trading.
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Quote from RedTankEra:

The biggest challenge for counter-traders is not getting to the mean, but not missing the easy trade, which is the trend resumption, if any.

In other words, if you counter trade but you tend to miss the trend trade, you doing it wrong and this is what typically happens with inexperienced traders; they get lost trying to obtain a profit in the counter-trade, and as they waited they missed the entry with the trend.

First and foremost, you want to make sure you don't miss the easy trend trades, and then, and only then incorporate counter trend trading techniques and setups that won't interfere with your trend trading.
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Wise words, you describe so of my current mistakes.

Thanks for post.
 
Interesting thread.

As you read most posts, the poster says he has an up/down orientation.

Using words like trend or chop as a realm is the usual up/down chat.

Trend and counter trend sound up/down as well.

Peer into an alternate orientation for just a moment and then go back to your forever locked in beliefs.

Most traders mess up continually and they do NOT know why.

This post will explain why you are messing up all the time.

The trend has a different number of parts than you say it does in your posts.

You see:

Up
down

up
down

up
down

You express two names: trend/counter trend.

I see trading cycles whereby two opposite trends compose a cycle.

To do this diffficult understanding process, you have to at least step out of the trap you endure for at least a moment.

The question to consider just for a moment is "How is it that two oposite trends can form a trading cycle?"

Each trend has to have three parts or an odd number of parts.

You all use an even number of parts mistakenly.

Above I put six items in your pairs.

Below are my equivalent triads.

dominant
non dominant
dominant

dominant
nondominant
dominant.

If you will, please find out why I win twice and you win once and lose twice.

My emotions are support, comfort and confidence.

Yours are anxiety, fear and anger.

To get to understanding just for a moment before you go back to the mess you believe, write in two columns the six items side by side vertically.

Going from top to bottom put lines between your pairs.

Notice why each of your pairs do not function consistently EVER.

Dominance is price moving from right to the left (away from the Right Trend Line)

Non dominance is moving from left to right (towards the right Trend line.

Why does a trend have to have an odd number of moves?

Geometrically, for a trading cycle to exist, trends can only have aan odd number of moves.

Now return to your faulty belief system and tell yourself what I know I know is false to you.

Notice how you spend a lot of your time on the sidelines waiting for a "setup". When you ar on the sidelines you are relaxed. Then you think you see a "setup", place a bet. You become anxious as you put in place your risk manangement and money management.

Did You enter a Dominant going to turn to a dominant?

Did you enter a dominant going to turn to a non dominat?

Did you enter a non dominant going to turn to a dominant?

There are three types of turns. (See just above)

What if you knew the order of turns? Forget about it. This guy is just talking bullshit.

You guys need to grow up quite a bit.
 
Quote from trader198:



warren buffet picks bottom, and an expert!
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Don't think he does, actually. I recall him buying Wells Fargo, it went down 50%(!) after he bought in.
 
Quote from MarketAddict:

So trader fighter I'm confuse here.. Are you saying That people can't make money from counter trading?
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No but it's the reason for not making any for many :)
 
When I hear traders say Counter trend doesn't work tells me it doesn't work for them. When I hear traders say they don't do Counter-trend that tells me they are happy with the style of trading they are doing presently. But Counter-trend trading is achieved by deep study and education, and every instrument has a different personality. You can't identify such as the E-mini ES intraday trading the same as Crude oil or even Mini-Russell, each have unique "Average Swings", but generally all markets and timeframes have in theory same Price Action of "eb and flow".

The market I know the most about is the S&P, I been trading it since 1987, first the big S&P when it traded in nickels at $25 a tick to ES which is so watered down to $50 a point, LOL. But regardless, except for higher volatility days, this Index trades in same unique patterns day after day, it might be a little different each day of not doing the exact patterns each day, but in the scope of overall patterns, it hasn't changed much since 1987. One to three trends exist in first 90 minutes, extreme of the day and sometimes high/low of the day will happen in first 60 minutes. I have 1-3 opportunities to dig out my goal in A.M. session. Afternoon session is four times harder to make two points than to make it in morning session and always easier to make on failed extremes(counter-trend), highs/lows will attempt to be broken by less than three tick breaks and usually good for one point. The close at 3:00pm CDT is in upper/lower 95% of the day will most likely go counter trend for 4 ticks in next fifteen minutes. And there are reasons for many occurrences.

Price action study if done long enough and backtested, often times price will show signs when it is most likely ready to reverse by showing breaks of pivot getting of smaller differences from last pivot being broken, a slowing down and for TA traders, indicators are showing divergences.

For me Counter-trend is not a disease, it is a great deal of study, backtesting and firm rules. I trade markets systematically, it is a business and the better I run my business, the more taxes I pay. LOL
 
This whole trend / counter trend conservation is esoteric (or is it academic)

Regardless.., I find it’s becoming boring

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Trend – anyone care to define it…. I suspect not – for numerous reasons…, of which the most obvious being the mkt would cease to exist

Counter trend – well hell if above is not definable then surly this isn’t either


Top – the highest point ever achieved by price since the instrument’s inception – everything else resembling a change in direction is a turn

Bottom – the lowest point ever achieved by price since the instrument’s inception – so likewise above, everything else resembling a change in direction is a turn

Move – successive effort in the same general direction over a measurable period of time (not ticks)

Turn – a point where price changes direction

Range – point where price ceases moving – yet has not turned and commenced to moving in the opposite direction

yeah, so now what

======================

Whip me.., beat me… just don’t bore the hell out of me

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I post the above not as a chastise to traders (they are an argumentative… yet lovable group) … rather as heads up to aspiring traders

(obviously trading confuses us all at times..., boggles the mind to think what you may be thinking)


Trend cannot be defined (widely agreed upon) for several reasons

Superficially – it can – but then change the TF you’re reviewing and so too likely does the trend – oh shit now what

Fundamentally it cannot (be widely agreed upon) – and because it cannot is exactly (and a basic ingredient of) – why mkts exist

When you find a trend is widely agreed upon – is when it soon ceases to exist (you need both buyers and sellers for a mkt – when either is absent – so too missing is a fundamentally key element)

===================

Well crap, whatever shall I do…

Pick a TF to trade – define the elements comprising your TF (including trend) – then stick to trading that TF come hell or high water

Knowing once you step outside your context (little world you’ve created.., know as your trading TF) – all hell will break loose

================

Btw; in actuality there are two elements to defining “trend” so it useful

First define the word

Next find a representation of your trend definition on your trading TF chart

Lastly, of course – trade it… and its counterpart if you nimble enough

==================

Inability to counter trend trading is not a disease – in as much as it a state of confusion – me thinks

==================

A little somthin… somthin to kick start the ole cranium this morning

Trade well - win - lose - or draw :)

RN
 
Quote from Handle123:

When I hear traders say Counter trend doesn't work tells me it doesn't work for them. When I hear traders say they don't do Counter-trend that tells me they are happy with the style of trading they are doing presently. But Counter-trend trading is achieved by deep study and education, and every instrument has a different personality. You can't identify such as the E-mini ES intraday trading the same as Crude oil or even Mini-Russell, each have unique "Average Swings", but generally all markets and timeframes have in theory same Price Action of "eb and flow".

The market I know the most about is the S&P, I been trading it since 1987, first the big S&P when it traded in nickels at $25 a tick to ES which is so watered down to $50 a point, LOL. But regardless, except for higher volatility days, this Index trades in same unique patterns day after day, it might be a little different each day of not doing the exact patterns each day, but in the scope of overall patterns, it hasn't changed much since 1987. One to three trends exist in first 90 minutes, extreme of the day and sometimes high/low of the day will happen in first 60 minutes. I have 1-3 opportunities to dig out my goal in A.M. session. Afternoon session is four times harder to make two points than to make it in morning session and always easier to make on failed extremes(counter-trend), highs/lows will attempt to be broken by less than three tick breaks and usually good for one point. The close at 3:00pm CDT is in upper/lower 95% of the day will most likely go counter trend for 4 ticks in next fifteen minutes. And there are reasons for many occurrences.

Price action study if done long enough and backtested, often times price will show signs when it is most likely ready to reverse by showing breaks of pivot getting of smaller differences from last pivot being broken, a slowing down and for TA traders, indicators are showing divergences.

For me Counter-trend is not a disease, it is a great deal of study, backtesting and firm rules. I trade markets systematically, it is a business and the better I run my business, the more taxes I pay. LOL
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Quote from Redneck:



===================

Well crap, whatever shall I do…

Pick a TF to trade – define the elements comprising your TF (including trend) – then stick to trading that TF come hell or high water

Knowing once you step outside your context (little world you’ve created.., know as your trading TF) – all hell will break loose

================


RN
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Great advice.


IMHO:
no_pm_please has offered a solid trading plan for counter-trending trading.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=20761&perpage=6&pagenumber=1

Although his advanced methods were never disclosed, he did mention few essential elements for good counter-trending setups.

Happy New Year to all.:p
 
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