Sending Mixed Messages

I've gotten some email from readers who accuse me of sending "mixed messages" about the merits of trading with the trend. There's some confusion because almost all of my short-term trading lessons are countertrend trades, and in most of my past daily postings I focused on countertrend opportunities. So what's a reader to think?

For folks just starting out, it makes sense to trade with the trend. Once you get a grip on your emotions and have a lot of confidence about your ability to execute trades, you can begin to consider countertrend set-ups. Some people unfortunately never get a handle on trading with the trend, let alone trading against it.

So from now on, in deference to the different abilities of my readers, I'll preface my posts by saying "This is a countertrend trade, only experienced players should consider losing money on it." ;-)

Nasdaq 100 Futures, Daily Chart

Yesterday the NQ did a test of top and reversed. Experienced traders might consider taking a countertrend short below yesterday's low. Obviously the trend on the daily is clearly up, but deft traders may be able to make a play on the short side here.

10-Year T-Note Futures, Daily Chart

These other two charts are examples of trades which are going with the trend. First is a short in the T-Notes from 116.45 (116^14) that was entered yesterday on the break of Friday's low. This is a textbook play with the trend, but that doesn't mean it's going to work out. In fact, by writing about it I've lowered the probability of success dramatically. ;-)

Gold Futures, Daily Chart

And finally here's gold again, which formed an up bar yesterday, against the trend. I would get short below yesterday's low if GC reverses today. Maybe it will put in another up bar today, who knows, I'll take things as they come.

Getting long above down bars in a clear uptrend, and short below up bars in a clear downtrend are bread and butter set-ups, the first plays that new traders should learn how to make. The tricky part is identifying the trend clearly and knowing which bars are best to execute against. That's where experience counts.

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