Trade on Trends and Trade Against the Trend Pros and Cons

Price is always trending. When the price trends or move in a direction, it provides the opportunity to trade. "Understand well the which direction is the price is trending or Moving" is the first step to the success. These major price trend or price movement, whether it is up or down, creates trading opportunities on both direction. IE. In A trending market, it gives 2 side trading opportunity.
  1. Trade on the direction of major trend
  2. Trade on the Opposite direction of trend
Price moves by waves creating swing lows and swing highs (Higher high Lower Lows).
Here we know that the Trading on the direction of trend is more easier and smoother than trade against the trend. Below picture shows it more conveniently
In the above Picture, Price is moving downwards that's why the major trend is to down. Eventhough the trend is down it felicitate trading opportunities on both side. Trade on Trend and Trade Against the Trend.

The Point 1,3,5,7 are the shorting trade point we trade on the direction of trend.
The Point 2,4,6 are the buying point we trade against the prevailing trend

Below are the table describe the difference between both trading and price movement on both types


Short (Sell) Trade on the direction of Trend
Long (Buy) Trade against Trend
Price Move Lower High to Lower Low
Price Move Lower Low to Lower High
Impulsive Move - Comparatively High Price Movement
Corrective Move - Comparatively Low Price Movement
High Magnitude*
Low Magnitude*
High Velocity - Sharp Price Movement to Down**
Low Velocity - Most of the time price moves with little upward slope, often Sideways**
1 2 3 Pattern Works fine and gives good result***
1 2 3 Pattern many time fails  gives very small profit.***
Candlestick Pattern works fine***
Candlestick Pattern may fails most of the time***
Long candles can be seen, little or no overlap, Wicks of the candles are small (or no wick)
Most of the time short candles can be seen, Over lapped candles, Most have wicks



*Magnitude - How much Price Move, Length Impulsive or Corrective
**Velocity  -  How Much time take for a Price Movement or How Much Price Moved in a perticular time
***Not applicable in the case of Momentum Change or Overall Trend Change

Things to Remember
  1. Understand the Overall trend of the Price Movement (Up or Down) is the first step to success. IE. Understand well which direction is the price moving
  2. Must have clear idea about which direction we trade. Ie Trade on trend or Trade Against the Trend
  3. Remember that the Candlestick pattern, 1 2 3 pattern may fails (or not give good result) if we trade against the trend. (Not applicable in the case of Momentum Change or Overall Trend Change)

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