How to do Counter Trading
Counter trading is when a trader looks for a pivot point, waits for that pivot point to be tested and trades in the opposite direction. This type of style can be considered going against the grain, i.e. not following the traditional methods. Therefore it can be extremely risky.
Pros of Counter Trading
- Counter trading has a high success rate for day trading.
- Another plus for counter trading is that when the market fails it often fails hard. Day traders who are able to play morning reversals can make a great living only trading the first hour of the day.
Cons of Counter Trading
- While counter trading has a high win percentage, losses can also be large, sometimes wiping out an entire account.
It is possible, if you set it too far away from your current position, that you pivot point will not be reached. This results in a loss of money, or the need to hold a security overnight (not something a day trader wants to do).
(Strategies for Day Traders)