Contrary Trading - A Live Example and Big Potential Profit Opportunity

Contrary trading if done correctly can give you low risk and excellent profits if you know how to spot them and time your entry correctly.

Here we are going to look at a contrary trade that looks a great opportunity which we looked at a few days ago.

Lets see how things are shaping up.

The US v Canadian dollar has given us some great profits from the downtrend now we have that banked profit and we are now long as per our articles realized at the weekend.

Right, let’s take a look at this trade.

Pull up a free chart service such as futuresource.com and let’s get started.

Key Support

Is 1.10 – This is key support on the daily charts.

Momentum is still down in the dollar longer term, but the Relative Strength Index (RSI) has turned up from oversold levels and is moving up. Yesterday’s we have a double bottom which is near term support and then key support at 1.10.

Stochastics have crossed and turned to the upside with bullish divergence and short term we are looking for strength.

We may now get a good bounce to correct the technically oversold position.

Target would be the middle of the Bollinger band at around 113.00, if prices can punch through this level look for higher prices to unfold

The key ( as we said at the weekend) is to always wait for confirmation before jumping in.

We have done this and are now long.

You ALWAYS need confirmation of a near term bottom and change in price momentum before trying the long side if you are trading against a strong down trend, you should never guess or predict if support will hold.

Stop levels at below 1.10 on a close basis.

When the majority think one way then:

A move in the opposite direction is likely! This is the art of contrary trading.

The dollar has had a lot of bearish news recently and in the short term prices should at least bounce - this is the opportunity outlined above.

Contrary trading is all about trading against the consensus and this trade is definitely that!

My in box is full of lots of reports telling me the dollar is in free fall and has no chance of recovery – but in the short term there is:

As all the bearish fundamentals are discounted and a bounce should therefore occur.

This is what contrary trading is all about – low risk high reward and trading against the majority.