Trading against the trend

Although the general rule of Forex says “Never trade against trend” but sometimes availability of opportunities dominate our mind and we go against the trend. And most of the times, the result favors our mind, not the opportunities. Decisions taken by heart or in haste often result in disasters. Let us now discuss the situations when we should trade against the trend.

A trend is defined by analyzing the daily charts for e.g. line charts or bar charts and technical aspects of the variation of different currencies. There are hourly signals and daily trend. If the daily trend matches with the hourly signals, the possibilities of strong movement are more. Now if the traders follow the charts and note the high and low peaks, they are going against the trend because peaks are fluctuating so one should not rely on peaks but should follow the direction.

Traders that do not follow the trend can be categorized as follows: they may be very experienced and skillful and they know what they are doing or they can be novice and don’t even know the basics. If they are new, then forex trading and gambling are exactly same for them. They hardly do any analysis before opening the buying or selling positions. They just check the peaks and open the selling position near the opening peak. They don’t follow the trend.  Hence going against the trend is always disastrous for them. On the other hand, if the trader is very skillful and experienced, going against the trend may prove to be beneficial for him. Because although the accuracy in depicting the trend by charts and graphs is very high, but it is not 100%.

So in this case, experience and knowledge dominates the trend and going against the trend helps in earning really good profit. For e.g. let us suppose the market is following a particular trend from last few days and it is depicted by analysis that it is likely to follow the same trend in near future also, so here comes the opportunity for the experienced trader to go against the market and set up his own trend if he believes that the depiction by charts and trend will not be valid. He can judge this thing only by his own study, experience and knowledge. So if he is damn sure of his own prediction, he will surely go against the trend.

The investors using forex autopilots cannot go against the trends as autopilots are specially programmed to follow the market trend.  So we can conclude that the trader, who opts to go against the trend, never uses auto-pilots. Also autopilots are not preferred even if you are going with the trend.

So now we can conclude that general rule of forex as mentioned above holds true only for the traditional trend followers having decent knowledge about forex and who do not want to take risks and going against the trend is not their cup of tea. Unless you are 100% sure of what you are doing, you should not go for trading against the trend.