PA-01-Recent Examples of Failed Counter-trend Trades

 Recent Examples of Failed Counter-trend Trades and why it always Better to Trade with the Trend

The author says that last week there were several price action signals that looked good, but they were counter-trend (against the main trend). Most of them failed because the main trend was strong.

They use this as a lesson: trading against the trend is usually a bad idea. Sometimes counter-trend trades do work, because markets naturally move up and down, but overall more of them fail than succeed.

The key point: counter-trend setups have a lower probability than setups that go with the trend. Since the forex market often has at least one pair trending, and there are always new opportunities, the author says there’s no need to take low-probability counter-trend trades.

For beginners, the warning is stronger: you should be very cautious with counter-trend trades because it takes a lot of experience to know which ones are worth taking.

The recommendation: first master trading with the dominant trend. Only later, after you’re skilled, consider adding counter-trend trading. Until then, don’t try to “pick tops and bottoms” (guess exact reversals).

AUD/USD:

This is Example 1: a bearish, counter-trend “fakey” setup on AUD/USD (dated 9/17/10). It looked well-formed and would have been tempting to sell.

But the author says traders who understand the market would know the Australian dollar was very strong at the time (both technically and fundamentally). So there was no good reason to go short against that strength.

The author explains that many counter-trend signals like this are just normal market behavior: markets don’t move in a straight line. They often pause or pull back for a few days and then continue in the main trend.

Then they point out a better opportunity: an inside bar that formed just above support near 0.9200. That setup worked very well and offered a high reward compared to the risk.

The lesson: it usually makes more sense to wait for trades that match the trend and appear at clear confluence levels, instead of trying to “stop a speeding train” (betting against a strong trend).

EUR/USD:

This is Example 2: a bearish counter-trend pin bar on EUR/USD (9/17/10). The author says it looked like a sell signal, but price never followed through downward, so the setup didn’t work.

Important detail: if you placed your sell entry slightly below the low of the pin bar (a sell-stop style entry), you would not have been filled because price never dropped enough. In other words, the market never confirmed the move down.

The author’s lesson about counter-trend trades: it’s usually better to let momentum trigger your entry. That means you use a stop entry (buy-stop above the high or sell-stop below the low of the signal candle) so you only get into the trade if price actually starts moving your way—rather than entering immediately at market or using a limit order.

They also point out that after the pin bar, an inside bar formed. That inside bar could have been traded as a trend-continuation setup by entering on a break above its high, and it would have produced good profits (“serious pips”).

Overall message: this chart is another example that trading with the trend usually beats trading against it.