Before every individual starts forex trading, there is a period where he has to make the crucial decision of what trading style and method he is going to use in the market to profit from forex rates. Most individuals are advised to never trade against the trend by their mentors, teachers, and experts.
However, it is not rare for creative individuals to think that they want to do something different. This desire can push an individual to decide to trade against the trend. If you are considering this as well then you should avoid it and instead innovate with the trend. Here are some reasons why you should not trade against the trend that forex rates are following.
Profits Are Smaller Against The Trend
Profits almost always tend to be smaller when you are trading against the trend because the trends themselves are uncertain. As profits will be smaller, you would feel the pressure to put in more trades in the market so as to meet your daily, weekly, or monthly targets. This can push you to overtrade and bear the brunt of forex rates surprises.
Losses Are Bigger Against The Momentum
Not only are profits smaller but losses are also bigger for traders who trade against forex rates trends. Needless to say, if too many of your trades are closed in losses then your account equity would soon start to show signs.
Trade Sizes Are Smaller
Because of the uncertainty of trading against forex rates trends, traders are advised to use smaller sized trades. While this may increase flexibility to a certain extent, it can reduce your profit margin as well as margin for error.
Predicting Turnaround Is Difficult
It can be extremely difficult to predict turnaround while you are trading against the trend. Because of this difficulty, traders often find their positions active for longer than they had to be which means that they either lose some profits or incur greater losses.
Trades Cannot Be Held For Too Long
The uncertainty of signals based on going against forex rates movements also means that trades cannot be held open for too long. This is in direct contrast to trading with the trend where a trader can leave his position open for a considerable amount of time as long as the trend is a major one.
Retracements Are Unpredictable
Retracements are easy to predict if you are trading with forex rates trends but this is not the case when you are trading against the trend. In fact, retracements against the trend tend to be highly unpredictable and dangerous.
There Is More Risk
In a nutshell, it can be said that there is more risk and less profit potential to trading against the prevalent forex rates trends. Moreover, trading against the trend also requires a lot of experience and skill. It is also worth pointing out that regardless of how confident you are, if you are new to forex trading then you will not have the experience to trade against the trend.