Is counter trend trading a disease?

Quote from NoDoji:

Counter-trend trading was the most expensive thing I've ever done in my life. It was a cancer for me as well and took a long time to eradicate.

I now take trades counter to the trend, but only when the trend is traversing a wide channel, the R:R is favorable and the market signals once and then confirms the signal.

In a strong trend (my favorite trading environment now), I will only trade in the direction of the trend and I do so aggressively. The odds of making money in the direction of a strong trend even with a totally random entry are above average.
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NoDoji:

Thanks for sharing your experience with countertrend trading. Mine was similar. I can say most of my biggest losses were from countertrend trades that I didn't get out at a small loss and it turned into monster losses. In fact, during my dark periods, one countertrend trade would wipe my entire gain for the day, week, month, or whatever time period you want to say.

Now, I tried to be better. But it still creeps in occasionally and would wipe out a few days gain.

How did you get rid of it PSYCHOLOGICALLY? I understand it's a high risk low probability success trade INTELLECTUALLY. But for years and even now occasionally I'm still attracted to it.

In fact, I'm afraid of POWERFUL trends! I like a steady trend. In a powerful trend, prices are moving so fast that I'm afraid to buy or sell at market. I try putting in limit orders, but prices keep moving away from me.

Then I end up doing the stupidest thing in the world. I look at the powerful trend and say "Oh, it has gone up enough or gone down enough. Let's countertrend now." So I go in countertrend and of course it goes even FURTHER in the direction of the trend. And I'm like a deer in the headlight and get run over by the train. Then I get out at a huge loss. Wait for the trend to continue some more and then go countertrend again. Of course, I get run over again.

Then finally I nailed the top or bottom about the 3rd or 4th losses, then it starts to go a little bit further and I'm sweating bullets and in so much pain. Then it finally eases and starts to reverse. This is the countertrend move I have been waiting all day long!

But since I was in so much pain from before as soon as it reverses and start to be in the green. I get out at a small profit. Then of course, it goes more and more in my favor but I'm already out. Had I just stuck with this last final countertrend trade I would have made back all of my losses and some! But on bad days, it would never reverses and I'm stuck with a huge losses, anger, shock, and disbelief.

And looking back at the charts, I've always thought how could I have missed it? It was just a just trend and I would have made so much had I just simply went with the trend and rode it for all it's worth.

Ahh... hindsight is 20/20.

Now, I'm very cautious about these countertrend trades..
Except in choppy markets...
 
Quote from tiddlywinks:

This will probably come off like I'm messing with you, but that is not the case.

There is only one "trend" and that is the current price MOVEMENT, as in right now, for any given market. The current price movement is the only "trend". It is the only price movement (trend) capable of producing REALIZED profit or loss.

So just what is "counter"trend? For that matter, no-one has defined "trend". If prices are MOVING, the direction, or lack of direction of the movement is the (only) "trend". Counter trading is doing the opposite of current price movement, with an opposite expectation as well.

NoDoji's CL example case in point. The short trade was supposedly "counter" to PREVIOUS MOVEMENT. But that previous movement was. The short trade was it's own movement, in reality not counter to anything. During that period, being long could have produced a realized profit or loss depending on entry price just the same as being short could have produced realized profit or loss depending on entry price. There is no trend, other than the current price movement!

In his post, Marketsurfer called trend following mental delusion. All I will say is that current, as in right now price movement is the only "trend" capable of producing a realized profit or loss. You are either trading with or against THAT. Anything else is your own judgements, biases, and beliefs... things that have nothing to do with actual price movement unless we change the topic to behavioral finance.

Trade On!
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Imho, trend is very important, because once it its defined, unless such trend has opposing trend forces (from other timeframes or fractals) conflicting with it, it is highly probable to continue.

Trend, if any, is defined by examining the previous price action and it is specific to data settings; meaning the market is composed of trends within trends, many times, trends facing and opposing each other which is why trend trading has so many disbelievers.

At the same time, if you don't believe trends exists and that they cannot be defined, then I supposed joining the discussion of this thread would be a little illogical since the original post, assumes, you believe trends can be defined.

Have a pleasant evening, time to rest.
 
Quote from Trader.Fighter:

Imho, trend is very important, because once it its defined, unless such trend has opposing trend forces (from other timeframes or fractals) conflicting with it, it is highly probable to continue.

Trend, if any, is defined by examining the previous price action and it is specific to data settings; meaning the market is composed of trends within trends, many times, trends facing and opposing each other which is why trend trading has so many disbelievers.

At the same time, if you don't believe trends exists and that they cannot be defined, then I supposed joining the discussion of this thread would be a little illogical since the original post, assumes, you believe trends can be defined.

Have a pleasant evening, time to rest.
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Hear ye, hear ye. By edict of a self-professed ET oligarch, all posts must be in agreement.
 
Quote from stevegee58:

Trend following on one time frame involves counter trend trading on a lower time frame. In other words when you buy dips you're really buying into a longer term trend while the market goes down in the short term.
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Quote from NoDoji:

Counter-trend trading was the most expensive thing I've ever done in my life. It was a cancer for me as well and took a long time to eradicate.

I now take trades counter to the trend, but only when the trend is traversing a wide channel, the R:R is favorable and the market signals once and then confirms the signal.

In a strong trend (my favorite trading environment now), I will only trade in the direction of the trend and I do so aggressively. The odds of making money in the direction of a strong trend even with a totally random entry are above average.
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Exactly
 
It seems a definition is in order. Can we basically agree with the definition below. (I know I will regret asking this)

What Are Fractals?
When many people think of fractals in the mathematical sense, they think of chaos theory and abstract mathematics. While these concepts do apply to the market (it being a nonlinear, dynamic system), most traders refer to fractals in a more literal sense. That is, as recurring patterns that can predict reversals among larger, more chaotic price movements.

These basic fractals are composed of five or more bars. The rules for identifying fractals are as follows:
A bearish turning point occurs when there is a pattern with the highest high in the middle and two lower highs on each side.
A bullish turning point occurs when there is a pattern with the lowest low in the middle and two higher lows on each side.
The fractals shown in Figure 1 are two examples of perfect patterns. Note that many other less perfect patterns can occur, but the basic pattern should remain intact for the fractal to be valid.

The obvious drawback here is that fractals are lagging indicators - that is, a fractal can't be drawn until we are two days into the reversal. While this may be true, most significant reversals last many more bars, so most of the trend will remain intact (as we will see in the example below).

From Investopedia.
 

Attachments

If a trend has formed do to some breakout of a previous pattern then in theory the trend is measurable and then a counter trend trade is justifiable. Or if a trend has taken you to a previous resistance level then that is a justifiable signal. If you like the feeling of counter trend trading you better be willing to trade anything under the sun because quality signals are few and far between if you are trading large time frames.
 
Quote from stevegee58:

Trend following on one time frame involves counter trend trading on a lower time frame. In other words when you buy dips you're really buying into a longer term trend while the market goes down in the short term.
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Great post Steve.
 
You cannot assume a larger timeframe or fractal trend can boss a counter smaller timeframe or fractal trend.

Breakouts will occur when one of the following occur:

A larger bosses a smaller countering

or

A smaller bosses a larger countering

It's up to you to decide who's going to win the battle, and many times waiting is the right call.

In terms of who's your friend ?

Not just the trend, as there could be several, but the trend actually winning.
 
Quote from trader99:

How did you get rid of it PSYCHOLOGICALLY? I understand it's a high risk low probability success trade INTELLECTUALLY. But for years and even now occasionally I'm still attracted to it.

In fact, I'm afraid of POWERFUL trends! I like a steady trend. In a powerful trend, prices are moving so fast that I'm afraid to buy or sell at market. I try putting in limit orders, but prices keep moving away from me.
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Once price breaks out (of something, such as a HOD/LOD or a triangle or a range) with conviction (definition of conviction should be defined for your instrument in advance, I use 8-10 ticks for CL), try this:

Look at a smaller time frame for pullback bars, a bar that breaks the high/low of a previous bar counter to the trending move. It looks/feels like the move is over. Hold your nose and place a buy stop or sell stop above/below the new high/low.

Just do that every time there's a strong trending move in play. It's a great exercise for getting over counter-trend trading. I started out a few years ago with very small size AAPL and AMZN stock, learning to do the absolute opposite of everything I'd done as a beginner.

Once you get over that fear of going with a strong trend, you should investigate ways to get positioned during the pullback in the smaller time frame, so when price breaks out you have bigger profit.

ADD: Getting into a strong trend off a pullback feels really counter-intuitive. If you remember the first time you got on a plane and it's barreling down the runway and you're thinking "There's no way this thing can just lift off the ground...we're not going fast enough...it's not gonna work..." That's how I felt entering with-trend off pullbacks. Often there's wiggle and jiggle that goes on and you feel like you've just put on the dumbest trade in the world, then suddenly out of nowhere....LIFTOFF! (Or CRASH if you're shorting, LOL).
 
nothing wrong about bottom picking and top short sale!

top and bottom produce the best profitable trade. yes it is hard to predict top and bottom,but worth doing that.

if you donot use margin, when index drop big, buy, maybe a little early,but often near the bottom or around there. common sense should prevail.


whether you are counter-trend trading or not, as a matter of fact, when you enter, you really do not know you are in the right direction or not, only time tells. often you see a trend, think you are smart and jump in the direction of the trend, but the market changes its direction just as you jump in.you try to followthe trend, but it is impossible because of the trend uncertainity!

any trade which produce loss is counter-trend trade. any trade which produces profit is trend following trade. the only way to make profit is in the direction of the market.

you can not avoid counter-trend trading, since the market's trend is uncertain or not clearly defined for you.

if everything is so clear,we all do not need trade, no one can make money. the uncertainity creates opportunity and traps, that is why someone can make money, why others lose.




Quote from Trader.Fighter:

I enjoy reading trader's psychology in public forums, not just this one, but others across "The Net". Watching how traders think and act, watching them get trapped, then enter a phase of denial by adding to positions doing very poorly because the trend just kept going.

One thing that has surprised me all along is the need to call bottoms in downtrends or the opposite, calling tops in uptrends.

The need to predict the change of a trend without an ounce of confirmation. Not just occasionally but some have adopted it as a dominant trading style. Is there a relation between this and vast majority of traders losing ?

Is it a trading disease or an addiction ?

It's certainly something harmful and during my early years of trading I recognized it as a cancer in my trading, one I had to eradicate to succeed.

On a different level, should counter-trend signals be used to exit trend positions ? Should they be ignored ? Should they be taken and reverse back when the trend have identified the counter-trend signal as clear trap ?

Not trying to disrespect anyone, just trying to start an adult discussion on the matter.

Best wishes and please discuss.
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