Counter-trend strategies rely on the fact that most breakouts do not develop into long-term trends. Therefore, a trader using such a strategy seeks to gain an edge from the tendency of prices to bounce off previously established highs and lows. On paper, counter-trend strategies are the best Forex trading strategies for building confidence, because they have a high success ratio.
Traders who have chased the price as it bounces upward and have often suffered losses because of a sudden reversal would want to keep this strategy in their minds when trading currencies. By employing this simple strategy, they can determine whether the price will continue in the breakout direction or not. This helps them to increase their profits or reduce losses.
Using the (CCI) as a tool to time entries, notice how each time CCI dipped below -100 (highlighted in blue), prices responded with a rally. Not all trades will work out this way, but because the trend is being followed, each dip caused more buyers to come into the market and push prices higher. In conclusion, identifying a strong trend is important for a fruitful trend trading strategy.
To easily compare the forex strategies on the three criteria, we've laid them out in a bubble chart. On the vertical axis is ‘Risk-Reward Ratio’ with strategies at the top of the graph having higher reward for the risk taken on each trade. Position trading typically is the strategy with the highest risk reward ratio. On the horizontal axis is time investment that represents how much time is required to actively monitor the trades. The strategy that demands the most in terms of your time resource is scalp trading due to the high frequency of trades being placed on a regular basis.
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