Why I'm Trading With The Trend and I'm not A Contrarian

7 gru 2022

Hello traders

1/ Trading with the trend, also known as trend trading, is a strategy that involves buying and selling securities in the same direction as the underlying trend in the market.
This is in contrast to trading against the trend, which involves taking positions opposite to the direction of the trend.

The first one for me is easier on my mind... I don't like trading like Michael Burry front-running everyone months/years in advance and being double digits percent negative PnL during that period.
I don't like it because it's draining, uncomfortable, unpleasant and I become an awful human being mean with everyone....

I've been journaling my trades for a decade, and read trading journals of hundreds of traders...
While TikTok/Instagram teaches us we have to be contrarian and goes against the crowd.... our brains aren't wired for it... maybe because we're social creatures... who knows.

I really don't "care" of being among the first ones on an investment/trade opportunity.

I'm here to make money, it's a marathon, not a sprint.

What I share is personal of course but I'm sharing it because I manage a community of traders and I'm speaking with them, they're sharing with me their feedback.

Even trading intraday against the trend, I'm not profitable - I'm just not made for that, I accepted it.
Most of my contrarian trades are losers

An important caveat though, for investing, when you see a security down 60/70/80/90% and the company behind keeps printing cash like crazy and the fundamentals are still great, I would invest SPOT for a long-term trade.

I wouldn't do it with derivatives due to trading fees to pay every day.

2/ There are several reasons why trading with the trend is generally considered more profitable than trading against the trend.

First, trend trading allows traders to capitalise on the momentum of the market.
When a security is in an uptrend, for example, it is likely to continue to rise as long as there is buying pressure.
By buying into the trend, traders can take advantage of this momentum and potentially profit from the upward movement in the price of the security.

That's how I designed my trading method, first we let a bigger timeframe signal being displayed on candle close, then we enter in the lower timeframe signals in the same direction.

Second, trend trading can help traders avoid false breakouts.
A false breakout is when a security breaks out of a trading range, only to quickly reverse and move back within the range.
Trading against the trend can often result in traders getting caught in these false breakouts, resulting in losses.
By trading with the trend, however, traders can avoid these false breakouts and potentially profit from the continuation of the trend.

Third, trend trading can help traders manage their risk.
When trading against the trend, traders are essentially betting against the market, which can be a high-risk strategy.
By trading with the trend, however, traders can reduce their risk and potentially improve their chances of making profitable trades.

In summary, trading with the trend is generally considered more profitable than trading against the trend because it allows traders to capitalise on the momentum of the market, avoid false breakouts, and manage their risk.

By following the direction of the trend, traders can potentially improve their chances of making profitable trades.

Thank you for reading
Dave