What you need to profit from contrarian trading is only the market environment
Trade according to market conditions, this is all
But this is the part that makes it difficult
That is because there is always the belief that “it will bounce back someday.”
Therefore, this should always be considered in conjunction with trend-following trading
Normally, you can just cut losses
After that, whether it will bounce back or not is ultimately decided by the market
In the end, it results in opportunity cost
Contrarian trading should be executed in a way that responds to the market environment
What makes that clear ultimately is price and time
Price is a support/resistance level, but as I’ve said many times in trading columns
Support/Resistance is not functioning in the sense of being reliable
Because it works only in hindsight, it can be used anytime later
In the end, you are choosing between two options: whether price will revert or will not
This binary choice extends to every approach
Whether in a trending market or in a range
Whether in a trend-following or contrarian approach
Thus, there are many such binary choices there
Contrarian trading is performed in a way that adapts to such market conditions
Moreover
Contrarian trading is in a state similar to trend-following
If you are going to engage in contrarian trading, you should consider whether you should also trade in the trend direction at the same time, or you won’t be able to continue handling it
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