How To Trade Against The Herd

Last update: 25 October 2021

This book is about trading based on market sentiment as shown by the

professional FXSSI indicator for MT4. Download indicator

Contents of the Guide

1. Strategy Basics.
1. Book of positions and pending orders is the basis of
everything.
2. Features and general recommendations.
2. Signals of indicators.
1. Current Ratio.
2. Ratios.
3. Profit Ratio.
4. Return Point.
5. MVP (Derivatives).
6. Stop Loss Clusters.
7. Trading Activity.
3. Multipurpose usage of indicators.
1. Example #1
2. Example #2
3. Example #3
4. Example #4
5. Example #5
4. Conclusion.
5. Risk warning.
6. Contact details.
Contrarian Strategy Basics

From 2001 to 2016, the average wealth of the richest 90% of Americans
grew 17%, rising from $120,000 to $140,000.

The wealth of the richest 1% of households grew 49%, from $7.7 million
to $11.5 million.

The richest 1% of Americans have the same wealth as the poorest 90%.

Applying The Law of Inequality to Forex and other financial instruments,

we can assume that the market is moving against the majority, namely
small traders, to the benefit of large banks, funds, brokers, and other
financial institutions.

This guide covers the basic techniques for analyzing the market
situation from the perspective of the contrarian strategy, as well as the
recommendations for trading using the FXSSI indicators:

● How to determine trade entry and exit points.

● Setting Stop Loss.
● Setting Take Profit.
● Placing Limit orders.

Data on open positions and pending orders of the largest brokers are
used to analyze the behavior of most small traders.

Comparing this data with the results of exit polls that mostly show close
to actual values, we can say that the market sentiment of 1% of traders
will be the same as that of the rest 99% of traders.
In mathematical statistics, this approach is called representative
sampling. It is also successfully applied in the forming of focus groups
for marketing and advertising campaigns.

Book of Positions and Pending Orders is

the basis of the Entire Strategy

When analyzing the market sentiment, first of all, we need to understand:

● at what price levels Buy and Sell trades of retail traders are opened;
● where Stop Losses and Take Profits of these trades are positioned;
● where pending orders are placed.
The combination of these trades is called the Order Book.

The Order Book is a graphic representation of trading activity, namely

open trades, pending orders, and Stop orders.

At each price level, data on trades are summed up and presented as a

histogram. As a result, we get a picture like this:

When a trader opens a trade, it is displayed on the right side of the order
book as a horizontal bar. Its width depends on the volume of this trade.
How your Sell trade opened at 1.1285 is displayed in the Order Book

When a trader places Take Profit, Stop Loss, or other pending order, they
are shown on the left side of the order book as horizontal bars at the
respective price level.
Pending orders in the Order Book

Due to human psychology, trades are distributed unevenly. When

analysing the order book, you can discover large clusters of positions
and pending orders at different price levels. Such abnormal clusters both
on the left and one the right sides of the order book are of interest to us.

Even though the Order Book is the most informative tool, a trader, who
studies the “trading against the crowd” strategy, might find it rather
difficult to understand at first. So our team has developed the package of
seven FXSSI indicators that provide key data obtained from the Order
Book. The supplied information is ready for analysis and is displayed
clearly and in a straightforward manner.

This guide covers the FXSSI Indicators package revealing the essence
and principles of trading with them. In case you’re interested in the
detailed analysis of the Order Book, we have a separate Guide for you.
Features and General Recommendations

There are sometimes situations when the market moves to the benefit of
the market majority, which is quite a natural phenomenon. Otherwise, the
price would never reverse.

According to our research, the average success rate of signals received

from the FXSSI indicators ranges within 60-70%. It is a high percentage –
not many strategies show such a result in practice.

However, one shouldn’t forget about money management. Any trading

system has losing trades, and ours is no exception. Following the money
management rules will allow you to minimise the negative effect of
losing trades.

The signals of FXSSI indicators are easily combined and can be used in
a comprehensive analysis, which also increases the chances of making
a winning trade. We’ll show you a few examples of how to do it at the
end of this guide.

Use our technique as an additional filter to your current trading strategy,

since it has been repeatedly noted that combining alternative trading
systems with the given one creates a highly synergistic (combined)
effect in trading.

Data on open trades and orders are available for the following currency
pairs:
We recommend starting with the most liquid currency pairs from the first
group since their readings are less influenced by retail traders.

Readings of the indicators update every 20 minutes, which gives an

opportunity to make decisions even in short-term (intraday) trading.

Next, we present the basic signals of the FXSSI indicators to enter and
exit trades, as well as recommendations for a quick start in trading
based on the “against the crowd” strategy.

Current Ratio Indicator

The indicator shows: the percentage ratio of traders who are holding
long and short positions. These data come from a few brokers
disclosing the information about open positions of traders.

Purpose: identifying trade entry and exit points according to the current
readings of the indicator.

Pay attention to: the Current Ratio indicator average value (AVG)
calculated based on the weight coefficients of several brokers.

Buy: when less than 40% of traders are holding long positions (green
circle).

Sell: when more than 60% of traders are holding long positions (red
circle).
Trade exit:

● balance of ~50/50% has been reached;

● the ratio of positions has gone beyond 30% or 70%, which
indicates that the financial instrument is significantly overbought
or oversold.

The indicator doesn’t show particular levels for setting Take Profits and
Stop Losses, but the following parameters are the most efficient:

Take Profit: 40-80 points, depending on the market situation.

Stop Loss: 40-80 points, depending on the market situation.

Indicator Features:

● Following a trend.
● Mid-term trading.
● The timeframe does not matter.

Advantage: it signals to buy or to sell using an indicative circle of the

corresponding color.

The success rate of signal (in percent): from 55 to 70%.

Ratios Indicator

The indicator shows: the historical change in the Current Ratio indicator.
The Ratios indicator draws a chart of Buy trades, while the percentage of
Sell trades is calculated using the formula: 100% – % of Buy trades.
Purpose: identifying trade entry and exit points according to the current
indicator readings, as well as searching for price manipulations in the
chart over the previous period.

Pay attention to: the Current Ratio indicator average value (AVG)
calculated based on the weight coefficients of several brokers.

Buy:

● when less than 40% of traders are holding long positions;

● in case of a sharp increase in the percentage of sellers for all
brokers.

Sell:

● when more than 60% of traders are holding long positions;

 ● in case of a sharp increase in the percentage of buyers for all
brokers.

Trade exit:

● balance of ~50/50% has been reached;

● the ratio of positions has gone beyond 30% or 70%, which
indicates that the financial instrument is significantly overbought
or oversold.

The indicator doesn’t show particular levels for setting Take Profits and
Stop Losses, but the following parameters are the most efficient:

Take Profit: 40-80 points, depending on the market situation.

Stop Loss: 40-80 points, depending on the market situation.

Indicator Features:

● Following a trend.
● Mid-term trading (a week).
● Timeframe – M30-H4.

Advantage: it allows you to carry out a historical analysis of retail

traders’ positions relative to the price movement.

The success rate of signal (in percent): from 55 to 70%.

Profit Ratio Indicator

The indicator shows: the percentage of profitable traders of the total

number. It also allows you to analyse both current and historical data.
Purpose: searching for price reversal points, as well as setting Limit
orders at the potential reversal level.

Pay attention to: sharp spikes (increases) in the number of winning

traders. When this happens, the gray line of the indicator will be colored
orange, which is a signal of a possible price reversal.

Buy: in a downtrend, when the orange line of the indicator appears. The
orange line signals a possible price reversal and a subsequent upward
movement.

Sell: in an uptrend, when the orange line of the indicator appears. The
orange line signals a possible price reversal and a subsequent
downward movement.
Trade exit:

● if the opposite signal occurs;

● the balance (~50/50%) between winning buyers and sellers has
been reached in BUY:SELL mode. It indicates that a trend
movement has been exhausted.
The Profit Ratio signals are short-term, so the size of the Take Profit and
Stop Loss shouldn’t exceed 60% of the daily range. You may set Take
Profit higher since you open a trade at the very beginning of the price
movement.

Take Profit: 20-60 points, depending on the market situation.

Stop Loss: 20-40 points, depending on the market situation.

Indicator Features:

● Trend reversal, trading in the flat market.

● Short-term trading (intraday).
● Timeframe – M5-M30.
Advantage: it allows you to see the Pareto principle in action, i.e., as
soon as the number of winning traders exceeds 30%, the price
immediately begins to react (reverse) and will not allow traders to close
their trades in profit.

The success rate of signal (in percent): from 55 to 65%.

Derivatives – Return Point (RP) Indicator

The indicator shows: the price level at which the minimum number of
winning traders will be reached (not to be confused with the balance on
the buy/sell tab of the Profit Ratio indicator).

Purpose: Take Profit setting. Sometimes it is also used to determine the

priority direction of a trade.
Pay attention to: the position of the purple line (RP) relative to the current
price.

Buy/Sell: the indicator is not designed to search for entry points.

Trade exit: the price hitting the RP level can be the signal to exit a trade.

Take Profit: for Buy trades, it should be set at the RP level above the
current price and for Sell trades – at the RP level below the current price.
It is recommended to set Take Profit with a 5-10 points margin from the
indicator level towards the entry-level.

Stop Loss: the indicator is not designed to search for the level where
Stop Loss should be set.

Indicator Features:

● Trading in the flat market.

● Short-term trading (1-3 days).
 ● Timeframe – М5-М30.
● Its operation range is from 15 to 65 points. It is not recommended
to use the indicator if the RP level is more than 65 points away
from the current price.

Advantage: it allows you to analyse how the price tends to get into the
equilibrium state, at which the minimum number of winning traders is
reached.

The success rate of signal (in percent): from 55 to 60%.

Derivatives – Middle Volume Positions

Indicator (MVP)
The indicator shows: the price level at which the volume of trades
opened above the indicator line is equal to that below the given line. In
other words, the indicator spots the middle of the volume of open
positions.

Purpose: identification of trend movement. It also helps to determine the

support and resistance zones at the end of a retracement.

Pay attention to: the MVP line changes over time.

Buy: when the indicator line is below the current price. During an upward
movement, you can also set a Buy Limit order at the MVP level or open a
trade when the price touches the MVP line (only if there is a trend in the
market).

Sell: when the indicator line is above the current price. During a
downward movement, you can also set a Sell Limit order at the MVP
level or open a trade when the price touches the MVP line (only if there is
a trend in the market).
Trade exit: a change in the indicator direction can be the signal to close a
trade. If a Buy trade has been opened, it is recommended to close it
when the indicator line settles above the price or fluctuates within the
range of the current price for 4-7 hours. The same is true for selling.

Take Profit/Stop Loss: the indicator doesn’t give recommendations

regarding these levels.

Indicator Features:

● Following a trend.
● Mid-term trading (1-2 weeks).
● Timeframe – M30.

Advantage: it allows you to determine a trend movement with high

probability. In addition, comparing the MVP with a moving average (MA),
which is the most common trend indicator, you can observe similar
readings. But the signals from the MVP come 12-15 hours earlier than
from the MA indicator.

The success rate of signal (in percent): from 60 to 75%.

Stop Loss Clusters Indicator

The indicator shows: zones where Forex traders have set their Stop
Losses, grouped into small, medium and large clusters.

Purpose: placing Take Profit, Stop Loss, and Limit orders, as well as
searching for entry points when the price moves in the flat market.

Pay attention to: large (thick line) and medium (line of medium
thickness) clusters of other traders' Stop Losses.
Buy: if the price falls and touches a Stop Loss cluster expecting a
reversal. You can also place a Buy Limit order in the zone of these
clusters. These recommendations are applicable outside of trend
movements only.

Sell: if the price rises and touches a Stop Loss cluster expecting a
reversal. You can also place a Sell Limit order in the zone of these
clusters. These recommendations are applicable outside of trend
movements only.

Trade exit: exclusively by Stop Loss or Take Profit.

Take Profit: it is recommended to set it at the level of large-sized (higher

priority) and medium-sized Stop Loss clusters. In addition, Take Profit
should be set with a 5-10 points margin from the SLC indicator level
towards the entry-level.

Stop Loss: avoid setting your Stop Loss at the level where Stop Losses
of other traders are positioned. To place it correctly and protect it from
knocking out, it is recommended to hide it behind large- and
medium-sized clusters. You should set it with a 20-40 points margin
from the SLC indicator level further from the entry-level.

Indicator Features:

● Trading in the flat market and following a trend.

● Short-term trading (1-3 days).
● Timeframe – M5-M30.
● Its operation range for setting Take Profit is from 20 to 65 points. If
the Stop Loss cluster is more than 65 points away from the
indicator, the probability that the price is going to reach it will
decrease.
Advantage: Stop Loss clusters of retail traders are a kind of magnet for
the price since the zones of the best prices, at which the smart money
(banks, funds, brokers, etc.) enters the market, are near them.

In case of a trend, you can see that the levels of Stop Loss clusters are
constantly moving. It is because the market crowd doesn’t believe that
the movement is true and constantly relocates its Stop orders or opens a
trade with a small Stop Loss expecting the price to reverse. During a
trend, you should focus only on the clusters located in the direction of
the trend.
On the contrary, in the flat market, Stop Losses of the crowd are
frequently knocked out, followed by a further price reversal.

The success rate of signal (in percent): from 60 to 75%.

Trading Activity Indicator

The indicator shows: increase/decrease in Long and Short positions at

the studied time interval. You can also observe the points with massive
entries/exits of retail traders.

Purpose: the analysis of the priority direction of price movement, as well

as searching for price reversals.

Pay attention to: the delta showing the difference between opened Buy
and Sell trades.

Buy: when the indicator shows the high volume of the red delta, an
upward price reversal can be observed in this case.

Sell: when the indicator shows the high volume of the green delta, a
downward price reversal can be observed in this case.
Trade exit: exit signals are identical to entry ones but in the opposite
direction.

Take Profit/Stop Loss: the indicator doesn’t give recommendations

regarding these levels.

Indicator Features:

● Trading in the flat market and following a trend.

● Short-term trading (intraday).
● Timeframe – M5-M30.

Advantage: it allows you to observe price levels that were of interest to

most retail traders. Based on this analysis, you can accurately determine
support and resistance levels.
The success rate of signal (in percent): from 50 to 60%.

Integrated Application of Indicators

Combining the signals of FXSSI indicators provides a specific synergistic

effect in comparison with their single use. Next, we’ll show the practical
examples of trading strategies using several of these tools at once.

Example #1: MVP + Ratios + SLC

1. The MVP analysis when the indicator line is above the current
price.
2. Enter a Sell trade when you receive a signal from the Ratios
indicator showing 60%.
3. Set the Stop Loss with a 20-40 points margin beyond the clusters
of most traders further from the entry-level.
4. Exit the trade if the price reaches the MVP indicator line and
fluctuates in this zone within 4-7 hours.

Note: it is similar for Buy trades.

Case #1
Case #2
Case #3

Case #4
Case #5
Example #2: Profit Ratio + Trading Activity + SLC

1. Enter a trade if there is a Profit Ratio signal.

2. We see a spike in the delta of the Trading Activity indicator.
3. If the RP indicator operation range is within 65 points, set Take
Profit with a 5-15 points margin from the indicator level towards
the entry-level.
4. Set the Stop Loss with a 20-40 points margin beyond the clusters
of most traders further from the entry-level.

Case #1

Case #2
Example #3: Profit Ratio + SLC

1. Search for a large Stop Loss cluster.

2. Enter a trade when you receive a signal from the Profit Ratio
indicator.
3. If the SLC indicator operation range is within 65 points, set Take
Profit 5-15 points away from the SLC indicator level towards the
entry level.
4. Set the Stop Loss with a 20-40 points margin beyond the clusters
of most traders further from the entry-level.

Case #1
Case #2
Example #4: MVP + SLC

1. Determine the current market trend.

2. Monitor the position of the MVP level.
3. If the MVP is below the price, open a trade when the price crosses
the MVP level or place a Limit order in a zone where MVP is likely
positioned.
4. Analyse the SLC indicator operation range. Set the Take Profit with
a 5-15 points margin from the nearest Stop Losses clusters level
towards the entry-level.
5. Set the Stop Loss with a 20-40 points margin beyond the clusters
of most traders further from the entry-level.
6. If the zone of Stop Loss clusters is rebuilt from above, you can try
to move your Stop Loss to breakeven and also relocate the Take
Profit to the next level of clusters.

Note: it is similar for Buy trades.

Case #1
Case #2
Case #3

Case #4
Example #5

1. We see a flat market movement.

2. A large Stop Loss cluster appears.
3. Place the Limit order expecting the price to reverse from the given
Stop Loss cluster or enter a reversal trade when these Stop Losses
are knocked out.
4. Set the Take Profit with a 5-15 points margin from the nearest Stop
Loss cluster level towards the entry-level.
5. Set the Stop Loss with a 20-40 points margin beyond the clusters
of most traders further from the entry-level.

Case #1
Case #2
Case #3

Case #4
Case #5
These strategies are an example of how you can combine signals of
several indicators. Real-world experience shows that the combination of
these two types is the most efficient:

● indicators specifying entry points (Ratios, Profit Ratio, StopLoss

Clusters),
● indicators specifying the placement of the Take Profit and Stop
Loss orders (Return Point, StopLoss Clusters).

In addition, the MVP and Trading Activity indicators will inform you about
the general price movement vector and will allow you to increase your
chances of making a winning trade.

By combining indicators and using the contrarian strategy, you can easily
choose your unique and most effective combination based on your
trading experience.

Conclusion

In this guide, we did our best to present as much information as

necessary to help you get familiar with our indicators. If you follow these
recommendations, your trading strategy will most likely change, and its
performance will improve. By combining the signals, you will definitely
get the confirmation of their efficiency in real-world situations.

We should also point out that the FXSSI package includes the Order
Book indicator, which provides data on Pending Orders and Open
Positions. The Order Book allows you to better understand the crowd
behaviour and analyse the market situation in more detail.

Download FXSSI indicators

Get more examples of using FXSSI indicator with volume analysis in

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Risk Warning

All materials in this manual are for informational purposes only and
must not be taken as a guidance for action. The data presented in this
article are only the assumptions based on our experience. Trading
leveraged financial instruments in the financial markets involves a high
level of risk and might not be suitable for all investors. You are
personally and solely responsible for making trading decisions and for
the results obtained in the course of trading.