Counter Trend Trade Tactics
Hit and run trading
“The trend is your friend” and all that, right?
I think we all agree, but, I reckon we also all agree that there’s still an opportunity to exploit some short-term edge playing counter–trend too.
Especially if you are on the lower TF.
But you can’t just reverse the strategy you deploy with the trend into counter–trend.
Counter–trend plays just unfold differently…
So I came up with some rules that I think are good guard rails to deploy when trading counter–trend.
#1 Don’t overstay your welcome
By trading counter–trend you know that at some point (assuming the trend stays intact) the market will move back to new extremes.
So by definition, you are on the clock.
The longer you stay on that counter–trend play the less likely it is to work.
Hit and run is the name of the game.
Get in, get out, without getting caught.
#2 No trailers
I like to play counter–trend as “A to B” or “Level to level” only.
No looking for runners or trailing stops.
If I think I’ve identified some kind of edge against the bigger tide, I’m going to know my lane and swing for that move only.
Many counter–trend traders have had the frustration of seeing unrealised P&L disappear very quickly because they overstayed their welcome.
We don’t want to be one of them…
#3 Don’t get obsessed
When you allow yourself to trade counter–trend, there’s a danger you’re always looking for those plays…
You can become blinkered into just trying to catch a turn.
And by doing that, can mean you miss out on the bigger, cleaner moves.
There’s nothing wrong with having a few counter–trend strategies in your playbook, but knowing when to deploy them, I believe, is key.