Counter-Trend Trading
Counter-trend trading is a trading strategy that attempts to make small profits by taking advantage of short-term market movements against the prevailing trend. It is a form of technical analysis that attempts to identify when a market is oversold or overbought and then capitalize on the resulting price movements. Counter-trend traders look for signs of a reversal in the market and then enter a trade in the opposite direction of the prevailing trend. This strategy can be used in any market, including stocks, commodities, and currencies.
History of Counter-Trend Trading
Counter-trend trading has been around for centuries, with traders attempting to capitalize on short-term market movements against the prevailing trend. The strategy was popularized in the late 19th century by Charles Dow, the founder of the Dow Jones Industrial Average. Dow believed that markets moved in cycles and that traders could capitalize on these cycles by entering trades in the opposite direction of the prevailing trend. This strategy has since been adopted by many traders and is still used today.
Comparison Table
| Strategy | Risk | Reward |
|---|---|---|
| Counter-Trend Trading | High | Low |
| Trend Trading | Low | High |
Summary
Counter-trend trading is a trading strategy that attempts to capitalize on short-term market movements against the prevailing trend. It is a form of technical analysis that attempts to identify when a market is oversold or overbought and then capitalize on the resulting price movements. This strategy can be used in any market, including stocks, commodities, and currencies. For more information on counter-trend trading, you can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Trend Trading
- Technical Analysis
- Price Action Trading
- Momentum Trading
- Scalping
- Day Trading
- Swing Trading
- Position Trading
- Fundamental Analysis
- Market Timing
