Here we are going to look at the art of contradiction trading, which if you can trade contrary to the majority at important market turning points, which can give you massive profits but also low risk.
These FOREX trading profits only come a few times a year, but if you simply concentrated on them and caught them, you could enjoy triple digit profits.
Let's look at how to catch them.
A good place to start is:
Exaggerated moves with a general consensus that the move will go on for ever in the media and from so called experts and gurus.
When you have a move like this start watching your charts.
It's a fact that strong bull and bear moves collapse when the news is at its most bullish and bearish respectably – human nature has pushed prices too far from fair value and a change is likely.
These moves are easy to spot, if you use the following tools:
Relative strength index
A great contradiction indicator.
Look for RSI To be over bought or oversold and watch for a turn up in a bear market and down in a bull market.
Another great contrast indicator when% bullish is above 80% in FOREX markets prices are overbought and when their below 20% their oversold.
Keep an eye on this indicator with the RSI, to spot potential trade set ups.
Looking for entry levels
When you start to see a these indicators indicating a top or bottom; its time to look for an entry in the opposite direction – ie a contradictory trade.
Do this by watching for support or resistance to form and hold.
Timing your entry
Use the stochastic momentum to indicate price momentum going the other way to the prevailing trend.
Ideally, you want a cross of stochastic momentum to downside (bearish divergence) in a strong bull market, or the opposite set up in a bear market.
The majority will not agree with you!
Not many people will agree with your point of view, but that should not worry you – keep in mind the vast majority are wrong at important market turning points, so its good they do not!
Great contrast trades do not come up everyday.
You will probably only see a few of these trades a year, where all the elements come together, but when they do, you will trade with very low risk and huge profit potential.
These are the trades that make the big profits.
If you use the above indicators and do not mind everyone telling you you're wrong you can bank some triple digit gains.
Learn to become a contradictory trader and have patience and the big profits will come.