[Question] Is the market basically trend-following or mean-reverting? [Answer]

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Abstract and concrete theories of FX: Mental + Trading Strategy

【Question】

Is the market ultimately a trend-following market? Or a contrarian market?

Because which one is more viable varies a lot from person to person, it’s not useful at all

Please tell me what to do

【Answer】

Because both trend-following and contrarian approaches can be effective

In some market conditions, either approach can generate profits

However, if you cannot cut losses

And your total net result isn’t positive

Then it’s basically not good

Do you understand what I’m saying?

In other words, the key is whether the method feels “easy for you to use”

There are quite a few cases where people think, “I can profit from contrarian trading,”

but they end up self-destructing in the end

Yet, many also fail to sustain the trend-following mindset until the end

That’s also a fact

“Contrarian trading seems better after all,” “Waiting for trend-following is a waste

then again,”

eventually a trending market occurs

and when that happens, contrarian traders fail to exit

“Isn’t trend-following better after all?”

This tends to become an endless loop

Because “a trending market will come someday”

Because “markets that make money with contrarian trading keep going”

Because “more traders are making money with contrarian trading”

In other words, it ultimately becomes a question of positioning

When you think about it, you conclude that “trend-following yields more profit”

But the answer is that this only holds true if you end up profiting from trend-following

With that in mind

Consider whether you are better off with trend-following

Or whether contrarian trading suits you better

Think it through carefully before you take action

If you can accumulate small profits and still tolerate the trend market only to cut losses in the middle, then contrarian trading is fine

If you accumulate small losses and your mental state becomes wobbly, but you want to end with a profit, then you should do trend-following

A strange way of putting it

“If you want to profit every day, go contrarian

“If you want to survive with your brain still intact, go trend-following

Most traders don’t think too deeply and tend to profit more from trend-following

Of course, this is assuming you can hold out until the end

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