The trend is your friend. Trading is like swimming. You can swim with the current or against it. In a survival situation, you can swim with the current forever. Outside factors such as water temps, need for food and sleep are another matter, but as for pure swimming ability you could swim with a slow or strong current forever.

Not so with swimming against the current. You will eventually tire and drown. That is an absolute certainty. Unless you find intricate ways to reserve kinetic energy and escape the current’s ravage for periods of respite, you will die. The same concept is true for trading with market direction versus against it. If I only had Rs 10000 for every person I heard say, “I’m a contrarian… I don’t follow the herd” through the past fifteen years, I’d have Rs One Crore for free money right now. Any idea where all those market contrarians are today? Other professions than trading.

Here’s a news-slap of reality for trend fighters: the herd is always right at beginning of trend moves. The “herd” itself is contrarian. The “herd” or masses do not follow a trend… they collectively fight it. That’s the fundamental why the primary wave of a directional move following first pullback from breakout of congestion is so powerful. Ever wonder why? It is the collective herd of contrarians tossing in towels from failing their fight against prior direction. Their collective stop-out and re-enter reverse is the jet fuel behind that wave.

So for a little while the herd is right. Until the collective contrarian herd thinks = feels that move has reached its end. Then they begin fighting the trend and subsequent waves of price undulation are created. Downtrends end when there are no more sellers. But those sellers aren’t all sell-to-open interest. Most of the selling exhaustion to mark a market bottom comes from stubborn contra-trend longs getting slammed out on sell stops. Once a majority of contrarian buyers in a downtrend finally puke and stand aside (busted, disgusted and not to be trusted) the market is free to reverse and turn upwards.

That is the perverse part of market behavior. Those contrarian longs were correct: price would eventually turn as expected. But the collective herd of trend fighters missed picking a bottom and instead have to pick up the pieces of their remaining depleted accounts. It’s perfectly OK to swim cross-current at times. But trying to swim upstream in contra-trend fighting fashion will leave you soaking wet, cold, hungry and exhausted. There is only one outcome to that failed effort, and it always ends the same.