#DayTradingStrategy Contrarian Trading Strategies

A contrarian trading strategy is also called a reversal trading strategy. It can be traded both to the long side in the example of buying a stock that is very weak for a reversal back up, or it can be traded to the short side by selling a stock that is very strong and looking for a reversal back down. Earlier in my career I really liked reversals because I found it easier to visually understand my entry. I'd look for 8-10 red candles in a row then buy the first candle to go green. That makes sense right? Unfortunately, when stocks are declining strongly due to breaking news, reversal trading is a battle where you are fighting against the trend. You really need to have great timing in order to catch the reversal perfectly.

Contrarian Chart Patterns

Reversal trading is still popular today among many traders. In Figure 9 you can see two distinctive patterns. The first pattern is at the number 1. This is called a flat top breakout The entry would have been at approx $3.40 with a stop at the low of the previous red candle. The target on this trade is 10% with approximately a 5% max loss. This would have been a classic momentum trade.