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 countertrend too.

Especially if you are on the lower TF.

But you can’t just reverse the strategy you deploy with the trend into countertrend.

Countertrend plays just unfold differently…

So I came up with some rules that I think are good guard rails to deploy when trading countertrend.

#1 Don’t overstay your welcome

By trading countertrend 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 countertrend 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 countertrend 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 countertrend 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 countertrend, 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 countertrend strategies in your playbook, but knowing when to deploy them, I believe, is key.