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Contrary Trading: Simple Forex Strategy to Spot Big Market Reversals
Oh Oh welcome to this be a play which is all about her crowd psychology and have a profit from it in the forex markets now in terms of what we'll be looking at images to be looking at the basics of our crowd moves markets and basically having from trade contrary to the majority of losers at the right time with high probability trade setups and basically just out buying a very simple strategy that anyone can make money with now before i discuss the strategy first of all kicked off the video with a short clip their of a flock of starlings and liberal cop singing you'll never walk alone what are they got in common they're emergent systems now emerging systems exist throughout nature in terms of different types of animals they also exist in terms of humans now the key points remember about an emergent system is when it groups together there is no leadership to the group the crowd feeds off itself now that will become more clear why that's so important as we go through the video now if you've ever been in a crowd you understand the pull of the crowd being yo-yo amongst 10,000 will then seeing you'll never walk alone I don't even support the club and yet you sing it you get empowered you feel with the crowd you feel good and there's just a natural human reaction our man is a social being used to banding together in herds and Stone Age times that's not always made us feel safer we always feel safe in a crowned and in terms of the markets yeah the majority always feel safe with the crowd however of course we know the statistics that the majority of traders lose so we don't want to be with the crowd we actually need to walk alone and you know I think a lot of traders um yeah they don't do their homework about crowds before they come in the market so I would strongly recommend you read the book the crab but Gustav leborgne I'm i did a quote from him as we came in it's very true when people get into a crowd intellect counts for nothing give you an example Albert Einstein one of the greatest minds full time lost money in the South Sea Bubble and he made the comment afterwards that I can calculate the movement of heavenly bodies but not the madness of crowds now Krabs yep they have not changed over the years they will always push prices too far to the upside or too far to the downside and when you've got that group mentality the herd a trend is strongly emotion they want to believe it isn't going to end and if you notice the news always reinforces what is going on in the markets and yeah you were often find yeah the commentators are saying this market will go on forever that it immediately reverses now the reason that happens of course is when everyone thinks alike everyone is likely to be wrong massive quote from Humphrey Neil who actually developed the art of country thing he's the first person to do it I strongly recommend you read that book as well once yeah prices have gone too far it doesn't take much from the break lower once the buying or selling is exhausted however you've got to spot the turning points and a crowd might be stupid but it can be very powerful it's going to be very careful in the way that you time your entry into the markets there in terms of over history you will always see price spikes to the upside or downside that run too far those those big short-term price spikes never laughs they always fade and you want to come in and trade them so how do you do it well you can do it technically and yeah I would strongly recommend if you don't do it technically I'm just an outline the way I do it um and I always basically look you know first of all for a price spike on a chart and then I look for the standard deviation from the mean I how much has it moved away from the average price now what price action traders yo Scott daddy you should use any implications at all I would say the most important indicator that i use a bit Bollinger Band it just gives me that in site to have far prices away from the mean price I know they're probably going to come back if they've moved too far away so you know I want prices at the answer Bollinger Band or even better right outside a bit then I know that I'm going to get a high probability trade prices are probably going to fall back to the average you testing a sample of Bollinger Band or any standard deviation tool the concept of moving too far too quickly then coming back to the mean is a proven concept it's very simple to learn as well once I've got my price spike and I see it it's gone too far I like to use momentum you know diverging from price to sell the market now you can use your price action for this if you on a reversal candle while I team's momentum though I'd like to come through a level just to give that confirmation I also like to keep my stock a good way back from behind and I just have never really succeeded when I put my stop two closest or traders put their stop yo like 10 pips behind the high own was he's fifty to a hundred pips and I found that's kept me out of trouble and I've done it now in terms of using yo technical setup co just giving you a very simple one you can use by always think you should also look behind the charts and buy that get more confirmation of the sentiment of the market is so how do you check the sentiment if I see a big price spike I normally go to one the big four X sites like save for X factory where they do a poll I want to see how many of the traders on that site or let's say bullish if there's a bigger trend and if the percentage is up at seventy even better above 19 that reinforces my view also like to look through the news see how many commentators are saying this move will never end and etc you know we know they always end we know that you know the majority are caught wrong at those big turning points and sour most the analysts and sonu right on Newswires another tool to use up videos Nick traders positions at the CFTC a free tool and it will give you basically the breakdown between speculators who are greedy and wanting to make money and commercial interests who are hedging it's a well-known fact that commercials are always on the right side of turning points so if you see the speculators heavily long commercials heavily short you know you're probably going to get a turning point to the downside now in terms of you know price spikes you do have to be careful when you trade them that you don't jump in too soon and yeah I'm all for using you know the fundamentals to back up the technicals and that fundamental tool to use it's like if you were very bullish move and the market is expecting bullish news back bullish news comes out and the market fails to move higher then it's probably going to break to the downside means the buying is exhausted and vice versa in a bear market and I think in terms of trading contrary to the crowd it's a simple concept to understand and you know you can learn simple tools I just can you the ones that I use and you can practice them and you can come become proficient at swing trading against the crowd of the important market turning points now markets will never change crowds will always act the same way this is shown in the statistics of winners two losers the ratio has never changed it doesn't matter how much technology we see that a ratio will never change so yeah if you've got a simple system based upon proven tools of videos high property setups you can trade against the crowd for profit now in terms of I mentioned this double bonds the crowd earlier on that book is now free on the net you should go and get it it is one of the greatest works on crowd psychology you can read I'd also recommend you read the book extraordinary popular delusions and madness of france by charles mikhay written around the same time in the 1800's a wonderful book and Charles McKay said men think and go mad in herds and only returned to their senses one by one how true is that of the markets today it's very true it's always been true markets in fact so recommend you get those free books and also I've mentioned Humphrey Neal the Artic on tree thinking another worthwhile but getting terms of the technical tools you need you can research them on the net and basically practice them and also learn to go against the crowd yo especially the news when it looks like a market is they're never going to turn around it always does if that is backed up by an extreme technically on the chart you've got a high probability set up now what I'm going to do is I just quickly finish up with a short clip of the Liverpool cop crowd getting back in the 60s and last saw this documentary when they tried to explain have football crowds behaved and it's the other trying to work out the psychology of the fact any of short clip wonderful clip and then a final quote from Gustav LaVon keep it in mind when you trade the forex markets that is the video for today I hope you enjoyed it take care man topologist studying this comp crowd would be introduced it was rich and mystifying the popular culture as in any South Sea Island their rhythmic swaying is an elaborate and organized ritual the 28,000 people on the comp itself begins singing together they seem to know intuitively when to begin throughout the match they invent new words usually within the framework of old liverpool songs to express anta literally crow or border common about the players or the piece but even then we begin singing these new words with one immediate huge voice they seem mysteriously to be in touch with one another with wacker the spirit of scouts the spirit is good humor and generous when they're winning but not necessarily when they're losing you