Counter Trend Trading

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Counter Trend Trading

  1. 1. <ul><li>“ I did not get good at trading </li></ul><ul><li>until I realized I was not good at trading .” </li></ul><ul><li>Leroy Rushing </li></ul>
  2. 2. Counter Trend Trading For Profits
  3. 3. <ul><li>Services Disclaimer (for full disclosure, see “Disclaimers” section of website) </li></ul><ul><ul><li>Information </li></ul></ul><ul><ul><ul><li>Contained within our website and affiliates is not a substitute for professional advice (e.g., stock broker, financial advisor, traderal banker). </li></ul></ul></ul><ul><ul><ul><li>Provided by us does not constitute legal or financial advice nor is it meant to be. </li></ul></ul></ul><ul><ul><ul><li>Intended to be general information relevant to common Trading issues and is offered in good faith (i.e., you do not have to use this information). </li></ul></ul></ul><ul><ul><li>Decisions </li></ul></ul><ul><ul><ul><li>Made by you are yours and yours alone, and you cannot under any circumstances hold Trading EveryDay responsible for any and all of your trading actions, losses, and costs incurred by you. </li></ul></ul></ul><ul><ul><li>Indemnification </li></ul></ul><ul><ul><ul><li>Client agrees to indemnify Trading EveryDay (TED) in the event of any claims against the Founder of TED and nothing in the materials shall be considered legal, financial, or actuarial advice. </li></ul></ul></ul><ul><li>Educational Disclaimer (for full disclosure, see “Disclaimers” section of website) </li></ul><ul><ul><li>All information, training, and coaching sessions offered by TED are for educational purposes only. </li></ul></ul><ul><ul><ul><li>No warranties or guarantees of stock market success are offered of any kind. </li></ul></ul></ul><ul><ul><ul><li>No advice will be given on specific stocks or on general financial management. </li></ul></ul></ul><ul><ul><li>TED will provide you with the tools to improve your trading skills. </li></ul></ul><ul><ul><ul><li>How you use the tools is up to you. </li></ul></ul></ul>
  4. 4. <ul><li>Major Price Action is trending upward and you are focused on SHORTING </li></ul><ul><li>Major Price Action is trending downward and you are focused on going LONG </li></ul><ul><li>Major Price Action is trading in a sideways consolidation pattern and </li></ul><ul><ul><li>Your focused on price action trending upward or </li></ul></ul><ul><ul><li>Your focused on price action trending downward </li></ul></ul><ul><li>Price Action gaps </li></ul><ul><ul><li>Up and you are focused on FADING the gap </li></ul></ul><ul><ul><li>Down and you are focused on the gap FILLING </li></ul></ul><ul><li>Price Action is relatively </li></ul><ul><ul><li>Strong in multiple markets and your focusing on weak price action setups for shorting </li></ul></ul><ul><ul><li>Weak in multiple markets and your focusing on strong price action setups for going long </li></ul></ul>
  5. 5. Ideal trading situation ENTRY <ul><li>LONG Entry </li></ul><ul><li>Up trend </li></ul><ul><li>Higher Highs & Higher Lows </li></ul>Price Action
  6. 6. Natural pullbacks in price action Ideal trading situation ENTRY <ul><li>LONG Entry </li></ul><ul><li>Up trend </li></ul><ul><li>Higher Highs & Higher Lows </li></ul>Price Action 4 4 4 4 4 4
  7. 7. Natural pullbacks in price action Higher highs and higher lows provide evidence of uptrend <ul><li>Major Up Trend </li></ul><ul><li>Higher Highs & Higher Lows </li></ul>ENTRY Price Action 4 4 4 4 4 4 B A C Flags Parallel 1 2 3
  8. 8. 1 2 3 Setup <ul><li>Signal </li></ul><ul><li>2B/3B Candlestick Reversals </li></ul><ul><li>Crossing MA’s </li></ul><ul><li>RSI – Short/Sell signals </li></ul><ul><li>Stochastic – Oversold signals </li></ul><ul><li>MACD – Down trending histogram </li></ul><ul><li>Volume decreasing </li></ul><ul><li>Divergence </li></ul><ul><li>No Upside Follow Thru </li></ul><ul><li>Major Trend </li></ul><ul><li>Higher timeframe uptrend </li></ul>200 MA 20 MA B A C Flag Trading against the major trend
  9. 9. 2. Bullish Rally 3. Sideways Topping Action 1. Sideways Bottoming Action 4. Bearish Rally 1. Sideways Bottoming Action Focus on Speed of uptrend Long Setups Focus on Speed of downtrend Short Setups
  10. 10. <ul><li>Most traders are NOT aware they are counter trend trading price action until they are actually in the trade and managing it. </li></ul><ul><li>Often, the speed of the uptrend can assist traders with determining the profit opportunity and “odds” of success for counter trend trading </li></ul><ul><li>Aggressive up trends often have aggressive retracements </li></ul><ul><li>Setups, Signals, and Strategies have to be very focused and fast for entry to maximize potential profit </li></ul><ul><li>Remember counter trends are short in duration </li></ul><ul><li>Very dependent on the timeframe for performance </li></ul>
  11. 11. <ul><li>Often traders loose trying to accurately trade the countertrend paradigm </li></ul><ul><li>Buying New Lows: </li></ul><ul><ul><li>“ Bottom-fishing” to pick the market bottoms and focus on exactly getting in at the low of the price action downtrend . </li></ul></ul><ul><ul><li>Traditional trading suggest waiting for confirmation that support has held and prices are moving in an uptrend with higher highs and higher lows </li></ul></ul><ul><li>Selling New Highs: </li></ul><ul><ul><li>Traders trying to pick the market tops and focus on exactly getting out or shorting at the high of the price action uptrend . </li></ul></ul><ul><ul><li>Traditional trading suggest waiting for confirmation that overhead resistance has held and prices are moving in a downtrend with lower highs and lower lows </li></ul></ul>
  12. 12. <ul><li>When countertrend trading know: </li></ul><ul><li>Support and resistance levels where traders identify entry and exit opportunities when trading. </li></ul><ul><li>Fibonacci percentage &quot;retracement&quot; levels where savvy traders use them to improve their entry and exit points. </li></ul><ul><li>How traders often try buying into support </li></ul><ul><ul><ul><li>If the major price action trend is in a downtrend, more than likely, it will continue </li></ul></ul></ul><ul><li>How traders often try buying a breakout </li></ul><ul><ul><ul><li>Buying breakouts in an uptrend is often chasing the move; similar to buying new highs or shorting new lows </li></ul></ul></ul><ul><li>How traders often try shorting into resistance </li></ul><ul><ul><ul><li>If the major price action trend is in a up trend, more than likely, it will continue </li></ul></ul></ul><ul><li>How traders often try shorting a breakdown </li></ul>
  13. 13. Use Fib levels, sideways consolidation and Breakouts for BUY signals Use Fib levels, sideways consolidation and Breakdowns for SHORT signals Trading with the trending price action. 1 2 3 1 3 2
  14. 14. 2. Bullish Rally 3. Sideways Topping Action 1. Sideways Bottoming Action 4. Bearish Rally 1. Sideways Bottoming Action 1 2 3 1 3 2
  15. 15. REWARD REWARD RISK RISK STOP ENTRY TARGET TARGET ENTRY STOP <ul><li>LONG Entry </li></ul><ul><li>Up trend </li></ul><ul><li>Higher Highs & Higher Lows </li></ul><ul><li>Short Entry </li></ul><ul><li>Down trend </li></ul><ul><li>Lower Highs & Lower Lows </li></ul>Price Action (1R) (1R) ( multiple R) ( multiple R)
  16. 16. 2. Bullish Rally 3. Sideways Topping Action 1. Sideways Bottoming Action 4. Bearish Rally 1. Sideways Bottoming Action Chart pattern confirms buy signal Chart pattern confirms sell signal
  17. 17. 2. Bullish Rally 3. Sideways Topping Action 1. Sideways Bottoming Action 4. Bearish Rally 1. Sideways Bottoming Action Aggressive Short Aggressive Buy
  18. 18. <ul><li>Lack of patience and discipline </li></ul><ul><li>Tunnel vision in reference to market conditions </li></ul><ul><ul><li>Inter-market Analysis </li></ul></ul><ul><li>Improper money management or risk management </li></ul><ul><li>Over-trading </li></ul><ul><ul><li>Too many markets at one time – not enough trades setups </li></ul></ul><ul><ul><li>Excessive trades – trying to recoup losses </li></ul></ul><ul><li>Pursuit of Perfection and High expectations of “Winnings” and “Profits” </li></ul><ul><ul><li>Catching “The falling Knife” </li></ul></ul><ul><ul><li>Trying to Pick “Tops” and/or “Bottoms” </li></ul></ul><ul><li>Not having a “trust-worthy” trading plan for trading trends </li></ul><ul><li>NO accountability for actions </li></ul>
  19. 19. <ul><li>Like fast-paced, risk-filled environment </li></ul><ul><li>Looking for “Instant Gratification” </li></ul><ul><li>Trading from a mindset of “greed” or “desperation” </li></ul><ul><li>Overconfidence </li></ul><ul><ul><li>Have a very demanding ego that unfortunately distorts one’s rational thinking </li></ul></ul><ul><ul><li>Emotions empower your actions </li></ul></ul><ul><ul><li>Remaining in position to avoid admitting wrong </li></ul></ul><ul><li>Relying on “Sense of Timing” or “Trading Intuition” </li></ul>
  20. 20. 2. Bullish Rally 3. Sideways Topping Action 1. Sideways Bottoming Action 4. Bearish Rally 1. Sideways Bottoming Action Chasing Short entry Chasing Long entry
  21. 21. End of counter trend End of counter trend (1R) (1R)
  22. 22. Reduce targets Tighten stops Reduce targets Tighten stops (1R) (1R) End of counter trend End of counter trend
  23. 23. Immediate exit Pre-Market Late Day Breakdown High Low Yesterday Today Gap Gap Fill

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