At certain times, particular types of candlesticks will form around historically-important price levels, and these setups have a much higher probability of working, at least in my experience. This short trade on the AUD/USD illustrates how going with the prevailing trend can be a very bad idea:
This trade was actually very simple: a bearish engulfing candle that formed right under the 0.75 pivot level, which I outlined at the start of the week in a pivot analysis article. If I had blindly followed the popular "trend is your friend" trading mantra, I would not have dared to place this profitable counter-trend trade that netted me 83 pips, with a 30-pip risk!
Another example of successful counter-trend trading would be yesterday's long position on the EUR/JPY, which I posted on twitter ahead of time:
#EURJPY looks a little bit oversold. Large Pin-Bar signaling a reversal here? $EURJPY #forex #ForexTrading pic.twitter.com/7xyomShIgY
— RazorForex (@RazorForex) June 9, 2016
This trade went about 50 pip in my favor, after which I decided that the stop-loss order had to be moved to break-even to protect from any losses. Unlike the profitable AUD/USD trade, this one did not hit its target - it retraced back down to the entry price - but I still consider these types of trades "successful" as they don't cost me anything.
These two GBP/USD trades also exemplify the potential inherent in going against the herd; the first one was a 100-pip Pin-Bar long trade that I took just as the Brexit was hitting the front page's of every financial paper; the second trade was a short off this reversal bar, which I tweeted on Wednesday.
The trend is not always your friend, in fact, most of the time - it's your enemy!
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