Is counter trend trading a disease?

T

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.
 
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.
 
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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Thank you for sharing your wisdom, could you please post an example of what you consider a logical and safe counter-trade in your eyes? I tend to take very little, if any.
 
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.
 
trading supp,res in an anticipation manner is fading a move before you know if the supp/res will hold, some folks,i am sure you know a few are of a contradictory nature and this type of trading suits their personality,any trading style can be profitable,just that most people can only be profitable with a handful of those
 
please define trend as it relates to the stock market. Stats prove that trend following is the mental delusion.

When trend following methods are tested on the stock market indexes, they tend to show that the correlation of past returns and future returns is negative, and that the number of runs of price changes in the same direction is less than would be expected by chance. Please produce an example of a real life movement in prices that would allow trend following to work retrospectively that does not also show positive serial correlations and an observed number of runs in the same direction that is greater than would have been expected by chance.

Take a look at weekly stock price changes in the S&P futures is approximately -0. 08. The correlation between daily changes is approximately -0.04 over almost all relevant periods. The chances of a rise following a series of 2, 3, 4 or more consecutive declines, in stocks, is approximately 10% higher than normal. Therefore, trend followers in the stock market averages would appear to be playing in a game heavily stacked against them.

Put simply the stock market shows a tendency for reversal, not trending when tested. The trend is the trick to get you to buy at the top and sell at the bottom.

Statistics has PROVEN that price trends do not exist in the stock market--- why does everyone still believe that they do?

surf
 
I don't like counter trend trading. I see it like this. If the stock pops Your going long trying to find a bottom while most traders are viewing it as a pullback and reenter short. Trying to find a bottom or top is tough. Most of the time a true reversal is a u shape not a v shape. Which means the fight between longs and shorts creates a consolidation zone. Once this consolidation zone is broken towards the correction side that should be your signal to trade. Patience is key to trading reversals.
 
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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Precisely, but waiting for one fractal to fail in order to get trend alignment is always an option.
 
Quote from Trader.Fighter:

Thank you for sharing your wisdom, could you please post an example of what you consider a logical and safe counter-trade in your eyes? I tend to take very little, if any.
More...

Price is trending up with previous consolidation holding as support on the 2-leg pullback.

Starting at the left side of the chart, notice how you can buy the close of any pullback bar (a bar that breaks the low of a previous bar and stays closed below it) and throw on a 20-tick stop and target (1:1 risk:reward) and end up with at least three 20-tick gains during that trend. That’s the great thing about a well-defined trend; price is more likely to continue in the direction of the trend than to reverse without warning. Usually the trend offers signs of “tiredness” when a deeper pullback is coming and you can exit that final with-trend trade for a scratch or a small loss.

As price plays with the round number 106.00, it begins to exhibits signs of “tiredness”. The shallow pullback off the 106.02 high results in a failed break during the 7:02 bar. Shallow pullbacks should result in solid new highs (or lows, in a downtrend) and when they don’t, a deeper pullback may be forthcoming.

The counter-trend first signal appears between 7:04 and 7:08 when the range breaks downside with conviction (10 ticks). That decent downside break opens up channel/range potential for price to test lower levels.

If price now pulls back to the previous range low in the mid 105.80’s and doesn’t close above 105.90, then previous range support is likely to become new resistance, and so I’d look to short a break of a bar low off that level, which would be confirmation of the first signal.

The R:R is great because my risk would be 10 ticks or less and my profit target (reward) would be around 20 ticks (a pullback to the earlier range breakout level as indicated by the S/R line in the middle).

All that said, the easy money was found in the direction of the trend :cool:

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