There are different types of traders in the forex market. For instance, the majority of individuals new to currency trading tend to go for the easiest possible strategies. However, there are also some extremely confident individuals who have a need for perfection.
These kinds of individuals try to learn and implement multiple strategies in the beginning stages of their currency trading even though it is not really recommended. There can be two outcomes for such individuals.
The first is that they prove the established recommendation wrong and become the exception because their confidence was based on real talent. The second possible outcome is that they are unable to make it work. The difference between the two, as is obvious, is skill and diligence.
It is entirely possible for you to succeed in currency trading with multiple strategies provided you research them properly. Therefore, if you are considering using multiple strategies and one of your choices is a counter trend strategy then you should know that the latter is difficult to implement. The best way to implement it would be for you to learn about counter trend strategies.
What Are Counter Trend Strategies?
As their name suggests, counter trend strategies are all about trying to profit from the market by looking for trend reversals and downtrends. These types of strategies tend to require perfection and precision which is why some traders are attracted to them.
However, the reason why these types of currency trading strategies are considered to be difficult is that trend reversals are extremely unpredictable. Here are some pros and cons of such strategies.
Maximum Usage Of Reversals And Downtrends
The best part about counter trend currency trading strategies is that if you can get the right forex signal then you would be able to get the maximum profit possible from the trend reversal or whipsaw.
Moreover, it does not matter if you are trading the reversal of an uptrend or downtrend. With the right signal, you can pick the right tops and bottoms and come out flush with money.
High Reward To Risk Ratios Are Recommended
Another good thing about counter trend currency trading strategies is that they depend on the trader only going for those trades which have a good reward to risk ratio. This is a form of protection where, even if you lose a lot, a single win will have you cover all your losses and come out with net profits.
The Rate Of Failure Is Dangerously High
The reason why high reward to risk ratios are recommended is that the failure rate of such strategies is very high. In fact, the more you look for precision the worse your failure rate. This is why it is important for you to have a way through which you end up with net profits even if you lose 6 out of 10 trades and only win on four.
The high failure rate of counter trend currency trading strategies can be considered to be their worst flaw because it can not only affect a trader’s account equity but also his confidence levels.