- A type of swing-trading strategy that assumes a current trading trend will reverse and attempts to profit from that reversal. Countertrend trading is a medium-term strategy in which positions are held between several days and several weeks. Countertrend traders rely on graphs (such as the Bollinger band), indicators (such as the Aroon indicator) and oscillators (such as the relative strength index or Chande momentum oscillator) to make their decisions.
Countertrend trading can be used as part of a diversification and risk-reduction strategy. To limit losses in the event that a trend does not reverse, traders should consider using strategies such as stops and time-based exits. Countertrend trading is one of the most common tools used by contrarian investors.
Investment dictionary. Academic. 2012.
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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 . Contrarian investors perform counter trend trading strategies purchasing shares… … Investment dictionary