Trading Against the Crowd

Trading Against the Crowd

Today we will tell you how to trade against the crowd and not fall into the trap of a large player. Global levels of imbalance (GUDs) will help us in this. At the moment of the formation of GUDs (global levels of imbalance), the market goes out of equilibrium and the probability of concluding a profitable deal doubles! Today we will consider the correct levels, how to find them on the chart and how not to get lost in the trade, following the majority – the crowd.

Using the levels, you will accurately see the expected direction of the price, find the correct entry points to the market for buying / selling. According to this trading scenario, you can close the maximum profit on completed trades

How does a major player trade?

The price does not move in a strictly straight line. Its movement is characterized as impulsive and directed in one direction or another.

A downward trend movement of the price, at which it is logical to make major sell deals, if we talk about medium-term trading. Most traders do this. What is a major player doing at this time? If he has set himself the goal of gaining a specific buy position, he will methodically “take out” all market participants, collecting the stops of sellers.

Moving in a downtrend, the price makes some highs that are important to us. In our case, it is advisable to set sell stops behind local highs. We have just reviewed the situation with the EUR / USD currency pair on the M30 TF. What do you think will happen at this time on the older timeframes? Absolutely nothing new. The same logic works here, but it is already applicable to an upward trend, which we observe for the same currency pair on TF H4.

The same approach in placing stops is relevant for purchases, even on higher timeframes. During an uptrend, stops were hiding behind local lows. When the trend became downtrend on the same timeframe after updating the highs / lows, traders used the same principles when opening sell positions.

In the case when it leaves without testing the level, we should look for the places where the market stops or its rollbacks and stick to them.

For example, you find pullback points and then analyze this entire pullback mechanism in detail in order to make a correct and balanced decision on the further algorithm of your trading. An indispensable condition – take your time. If you are unsure about a particular situation, do not experiment with your trading account. The best solution in such a situation would be to simply watch the price in order to check the correctness of your conclusions in the future.

The formation of global levels of imbalance occurs in a similar way in other currency instruments. For example, if we look at TF H4, the chart of the GBP / USD currency pair, we will also find the places where the global imbalance level is formed. Of course, we find the very maximum that renews this level. False breakout, false movement or impulse – these are the conditions that we consider as significant support.

How does a major player trade?

When the price goes down

If it was a sharp impulse movement, then someone managed to open at the very beginning of its formation or in the middle, and someone literally jumped “into the last carriage” if the impulse was formed on a global downtrend and someone could have previously opened positions that were simply held here. The situation is dangerous for those who are trying to sell “well” here, it is fraught with sudden carryover. Usually, sellers’ stops lie above the entry points – this is a “tidbit” for those who collect these stops in a given place.

You can follow the same logic:

  1. We have a local maximum (1), from which sales were made (2);
  2. Selling stops (3) traders set behind the local maximum (1);
  3. Further, the price with a false breakout broke the below the local level, turned around and went higher – to the updated local maximum, where the sellers’ stops were collected;
  4. The impulse formation and small corrective movement at the same local level allowed some traders to exit with small purchases;
  5. Further, we notice a reversal, an impulsive downward corrective movement, where the price breaks through the level of the local maximum and confidently descends into sales. Naturally, in this situation, buyers were amicably gathered on the chart (5).