DEFINITION of 'Countertrend Strategy'

A trading strategy where an investor attempts to make small gains through a series of trades against the current trend. It is also known as "counter-trend trading".

BREAKING DOWN 'Countertrend Strategy'

Contrarian investors perform counter-trend trading strategies - purchasing shares when prices are low and selling when they're high. The investor receives smaller gains since the full market swing is not recognized.

Many counter-trend investors use momentum indicators to determine the best times to execute their trades.

RELATED TERMS
  1. Countertrend Trading

    A type of swing-trading strategy that assumes a current trading ...
  2. Retail Investor

    Individual investors who buy and sell securities for their personal ...
  3. Trend Trading

    A trading strategy that attempts to capture gains through the ...
  4. Covered Bear

    A trading strategy in which a short sale is made on a long position. ...
  5. Contrarian

    An investment style that goes against prevailing market trends ...
  6. Momentum Investing

    An investment strategy that aims to capitalize on the continuance ...
Related Articles
  1. Trading

    Combining Trend-Following and Countertrend Indicators

    In the long run, one of the best approaches to successful trading might be melding these two seemingly disparate methods together.
  2. Trading

    4 Common Active Trading Strategies

    Learn four of the most popular active trading strategies and why active trading isn't limited to professional traders anymore.
  3. Trading

    Make Money With The Fibonacci ABC Pattern

    We break down this indicator into simple, easy-to-understand pieces so you can profit.
  4. Trading

    The Elements of a Perfect Momentum Trade

    Five technical elements build profits in high-risk momentum trading strategies.
  5. Trading

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  6. Trading

    Introduction to Options Types

    Options are often the bread and butter of day traders. Here are some of the more common types of options.
  7. Trading

    No Forex Strategy Of Your Own? Try Mirror Trading

    There are many advantages to trading a mirror strategy, yet markets are dynamic, and regardless there is always a risk of losses.
  8. Trading

    Forex: Should You Be Trading Trend Or Range?

    In FX, it's not the price environment that decides this for you. Learn the differences to see which you prefer.
  9. Trading

    Strategies For Playing The Confirmation Trade

    Trends often escalate when the confirmation process is completed after a breakout or breakdown.
RELATED FAQS
  1. Why do some traders implement counter-trend trading into their core strategies?

    Learn about differences between trend trading and countertrend trading, and discover why some traders add countertrend trades ... Read Answer >>
  2. How risky is it to create a counter-trend trading strategy?

    Read about some of the different kinds of risks involved with trading strategies that rely heavily on countertrend trading, ... Read Answer >>
  3. How do countertrend trading strategies work?

    Profit from countertrend trading strategies that are used to catch trend changes or to make additional profits from temporary ... Read Answer >>
  4. How do I build a profitable strategy when spotting a Golden Cross pattern?

    Learn the primary trading strategies that traders and market analysts employ when they have identified the occurrence of ... Read Answer >>
  5. How do I implement a forex strategy when spotting a Rising Three Methods Pattern?

    Learn how to implement a forex trading strategy designed to profit from a trend continuation signal given by the rising three ... Read Answer >>
  6. What are the main disadvantages of using Fibonacci Retracements for trading strategies?

    Learn about the disadvantages inherent to the Fibonacci retracement, an indicator built on the Fibonacci sequence used in ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center