Contrarian averaging down is the easiest way to make money, but it’s also the method where traders are most prone to making mistakes and losing
Contrarian averaging down can be quite profitable in the short term
but from a long-term perspective, many contrarian averaging down traders end up losing a lot
and yet even after that, they remain captivated by the appeal of contrarian averaging down
and many traders cannot stop doing contrarian averaging down
After all, in the short term it feels like you can “make money”
which makes you feel “safe” by doing contrarian averaging down
this is because you can escape from mental trading pressure
What traders fear the most is losing
therefore, contrarian averaging down allows them to escape that fear
however, when a trending market comes, it can suddenly reverse
because they were afraid of losing
they have difficulty admitting losses
and end up being dragged along to a big loss
this pattern repeats
so it’s better to
shift to trend-following trading
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