Contrarian investing is a vibrant field that is full of conflicting data; one person tells you should do this and another tells you should do that. The funny part is that none of these experts has any notion of what is right from wrong because they are all talk and no action. In other words, the majority of these experts have not followed one piece of their advice. If they had, they most would be bankrupt today, and those that follow them usually end up losing their hard-earned money. These experts fall under the category of “fashion contrarians”, whose only role has been to glamorise this field and cannibalise the meaning of the word “contrarian.”
These fashion contrarians are no different from those investors whose primary driving force is raw emotions. These investors with the mass mindset only imagine that they are doing things differently, but the moment panic or doubt is in the air, they take flight like bandits being chased by the hounds of hell. A real contrarian is familiar with the basic concept of mass psychology. If you are not familiar with these rules, you are doing yourself a disservice and should catch up on them ASAP. The single most important rule of mass psychology is that one should not abandon the ship until the emotions have hit the boiling point and vice versa. For example, if the market is in a bullish phase, you do bail out just because the masses have jumped on the bandwagon. Instead, you wait for them to embrace the market euphorically before closing your positions.
Tactical Investors Stance on Contrarian Investing
While we at the Tactical Investor embrace the concept of contrarian investing our true focus is on the joining the Primary rules of contrarian investing with the powerful concept of mass psychology. The combination of the two methodologies creates an incredibly robust system. Psychology is the key driving force behind almost every human action and understanding it could significantly improve your overall experience and results as an investor. To this winning combo, we add technical analysis, and the end result is an unbeatable system. This is what led us to craft the trend indicator, a tool that magnificently combines the supreme elements of technical analysis with the most compelling elements of Mass psychology.
Key Contrarian Investing Rules
The rules laid out below will provide both the beginner and seasoned investor with ideas that ought to improve his or her trading skills if…