Thinking From the Opposite Angle in Trading
In trading, one of the best ways to mitigate risk and improve decision-making is by thinking from the opposite angle. Whether you're a bull or a bear, taking a moment to consider the opposing viewpoint can provide valuable insights and help you prepare for unexpected shifts in the market. This viewpoint will help us decide whether to enter a trade or potential places to exit position(s).
The Bull's Perspective: Consider the Bear's Scenario
If you're entering a position as a bull, try to imagine what factors could lead the market in the opposite direction. A bear scenario might involve larger timeframe resistance zones or pivots or trendlines. Are you trading with a larger timeframe trend and entering on a short term pullback or just flipping positions against the overall trend?
By mentally preparing for these scenarios, you’re not blindsided if the market moves against you. You can take steps to protect your gains, such as setting stop-loss orders or adjusting your position to hedge against potential losses.
The Bear's Perspective: Think Like a Bull
Conversely, if you’re short on a stock or anticipating a market downturn, imagine what could cause the price to surge. Where are the demand zones and where the buyers may step in?
ChartGuys-Lamont uses Volume Profile Analysis to help create gameplans.
Don’t be late to the party!
For example, If you’re entering short on a break of a daily uptrend, be wary of the weekly chart which could simply be looking for a bull flag near the EMA12 for example. This ultimately means any daily downtrend may lack any kind of follow through due to the larger uptrending nested timeframe and therefore you’re late with an entry and swimming against the tide with no real space for continuation.
The below example of Bitcoin shows a weekly downtrend with no follow through because the monthly timeframe was in an uptrend setting up for a bull flag.
The Importance of Mental Flexibility
Thinking from the opposite angle isn’t about doubting your trade or second-guessing your analysis. It’s about developing mental flexibility to anticipate different market conditions and potential areas that the opposing side may enter. The more you can see potential outcomes—both bullish and bearish—the more you can create zones to exit all or parts of your positions.
How This Helps Improve Risk Management
By incorporating the opposite perspective into your trading strategy, you build better risk management practices. By noticing the opposing side’s gameplan can help us decide ahead of an execution, whether the Risk to Reward is worth it.
Conclusion
The key to successful trading lies in staying flexible and prepared for all possible scenarios. Whether you’re a bull or a bear, taking the time to consider the opposite viewpoint helps you make smarter, more informed decisions and reduces the likelihood of being caught off guard by market shifts. In a world of unpredictability, trading from both angles is one of the best ways to stay ahead.
Further Learning:
How to Play Bearish (Members-Only Educational Video)
