Which is better in FX, contrarian (mean-reversion) or trend-following? The answer is consistently trend-following: if your goal is to earn money, go with contrarian; if your aim is to profit, go with trend-following.
For a long time now
In the life of doing FX, I’ve never seen this discussion end
Probably a topic that never ends
But I have already reached a conclusion about this topic
I think it’s the so-called technique-type and loop-type
Counter-trend trading can indeed be incredibly profitable
If the goal is to make money, counter-trend trading
also has a strong tendency toward averaging down
That’s why counter-trend trading pairs well with averaging down
the more you use it, the more you can profit
However, it is too weak when a trending market comes
Because the characteristic of averaging down on counter-trend trading gets in the way
With that feature, no matter the market, it would “return” which is why it could profit
But in a trending market, there are markets that don’t return
Even if you’re averaging down, there will be markets where you can’t be saved
If you can’t cut losses at that time, you will obviously lose
Losses at that time become quite large
This is the disadvantage of counter-trend trading
And the reason it’s called a technique-type
Counter-trend trading can be used if it is possible to cover losses with a technique, but
in reality, most traders should use the trend-following approach of the loop-type
If you want to build future wealth, the trend-following approach is absolutely better
The market is fundamentally divided into range markets and trend markets
Simply put
Markets that return = range markets
Markets that don’t return = trend markets
You can consider it this way
Trend-following is a style that trades in the non-returning, trend markets
Because markets that return appear far more often
Until a non-returning market appears, the number of losses from cutting losses will keep increasing
However, just as you end up losing with counter-trend averaging down
the trend-following traders who take the opposite trades
when a non-returning market appears, profits will continue to grow
If you get used to this, you can also become capable of pyramiding
What you did when you were actually losing
It would be even better if the concepts of counter-trend and averaging down disappear
Because then all your thinking and concepts will shift to trend-following awareness
Once you shift to trend-following awareness, in any market
“I’ll trade only the non-returning markets with trend-following to grow profits”
With only this mindset, you can trade and profits will grow
If you understand this trading secret, the rest is simply mastering the trading strategy of trend-following,
and you can increase a lifetime amount of profit solely through trend-following
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