Monday, April 2, 2012

Counter Trend (CT) trading the high probability way, be realistic with target and risk

Counter trend trades pose a higher risk because you are fighting the trend, BUT when weakness in a market side occurs, they became high probability; or should I say the dominant trend trade becomes low probability? It doesnt really matter how you justify it, the most important thing is to recognize the buyer or seller weakness or failure, and act on it. You want to be safe with these types of trades, and only take then when the weakness if recognized. I have a minimum of 1:1 risk to reward on these setups. I try to be realistic on how far the move may go and I assume a pullback over a reversal. For example, if I can see a pullback going 2.5 points, $50, I'll place my target there and start with a stop of $50 max. Once I get movement, I adjust it to one tick above/below entry.


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