Forex Market Contrarian Strategies

When newer traders are getting started in the forex markets, it can seem very difficult to find new ways of understanding the market and new ways of placing profitable trades.  This can be difficult because the financial markets are not a new invention.  In fact, they have been around for thousands of years — far longer than any of us have been alive on Earth.

So, it makes sense to look at some of the trading strategies that have been tested during that time.  This is the best way of knowing which direction is best to take when trading in the modern forex markets.  Some of the classic approaches involve terms like range trading and trend trading, and strategies like these have been detailed further in the market research section at Alpari Forex.  It is always a good idea for traders to use a knowledge base like this before any live trades are placed, as there is greater potential for unnecessary losses.  

Trend trading and range trading strategies work great but they do not cater to the styles and knowledge bases of all traders.  This is precisely why it is a good idea to have an understanding of some of the other approaches that are typically used when navigating the forex markets.

Contrarian Strategies Defined

One of the best alternative strategy approaches here is the contrarian strategy, which requires forex traders to work against the dominant trends that are seen in the market.  This might seem like a daunting task to some, as it means that in order for the trade to succeed it must fight against the majority of the momentum that is visible in the market.  

But when these types of trades are structured properly, they can generate massive returns in a relatively short period of time.  One of the most famous maxims in the market is that “it is always a good idea to buy low, and sell high.”  This is the best way of looking at contrarian trading and this is something that can be used to significant advantage when trading in the forex markets.  Buying low give you the opportunity to see the greatest gains as long as you remember to sell the asset once new highs are reached.

In all, these are factors that should be considered when newer traders are looking for ways to define their trading strategies.   There are many different options and routes to take when planning these types of situations, so take the time to conduct your due research in these areas.



About the Author
Richard Cox is a university teacher in international trade and finance. Lessons in macroeconomics and price behavior in equity markets. Trade ideas are generally suggestive of time horizons of one to six months.

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