Countertrend Strategy

AAA

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".

INVESTOPEDIA EXPLAINS '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. Sideways Market / Sideways Drift

    A sideways market occurs where the price trend of a certain trading ...
  2. Contra Market

    A move against the direction or trend of the broad market. Contra ...
  3. Countermove

    The movement of a security's price against the current trend. ...
  4. Contrarian

    An investment style that goes against prevailing market trends ...
  5. Double Up

    An investing strategy in which a trader doubles his or her current ...
  6. Momo Play

    A slang term used to describe an advanced trading strategy based ...
RELATED FAQS
  1. How can a trader profit from a Dead Cat Bounce pattern?

    A trader can profit from a dead cat bounce pattern by using it to enter a low-risk short selling position in a market. The ... Read Full Answer >>
  2. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  3. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  4. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>
  5. What are the alert zones in a Fibonacci retracement?

    The most commonly used Fibonacci retracement alert levels are at 38.2% and 61.8%. A 50% retracement level is also commonly ... Read Full Answer >>
  6. How was the Fibonacci retracement developed for use in finance?

    The use of Fibonacci retracements in stock trading was popularized by noted technical analysts W.D. Gann and R.N. Elliott. ... Read Full Answer >>
Related Articles
  1. Trading Strategies

    Use The Momentum Strategy To Your Advantage

    Learn how to use a number of different indicators to know when to make your trading moves.
  2. Forex Education

    Forex: Finding Your Trading Style

    Determine your own trading style, and the versatile currency market will accommodate it.
  3. Forex Education

    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.
  4. Trading Strategies

    Momentum Indicates Stock Price Strength

    Momentum can be used with other tools to be an effective buy/sell indicator.
  5. Fundamental Analysis

    Explaining Price Targets

    A price target is what an investment analyst projects a security’s future price to be.
  6. Fundamental Analysis

    Present Value Interest Factor of Annuity (PVIFA)

    PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.
  7. Chart Advisor

    ChartAdvisor for July 30 2015

    Weekly technical summary of the major U.S. indexes.
  8. Active Trading Fundamentals

    Five Biggest Obstacles Facing First-Year Traders

    Address these five obstacles and you'll make significant progress as a first-year trader.
  9. Options & Futures

    How To Hedge Put Options Using Binary Options

    Want to hedge your plain vanilla long put option position with binary call options? We show you how.
  10. Options & Futures

    How To Hedge Stock Positions Using Binary Options

    Here’s a step-by-step method to hedge your long (and short) positions in stocks, using binary options.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!