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Contrarian

Google search trend for BTCWorldwide, 90days, search trend in Google for bitcoin (red arrows). Orange arrows represent " bitcoin use case ", ie the educated investor? It shows you the mainstream peak euphoria, enthusiasm or fear , usually at market extremes? Highest search volume coincides with trade volume. Other indicator for "hype" would be bitcoin hashtag in twitter/X. According to theory - during enthusiasm people would ignore the bad news or events, and only see everything as positive. This is a contrarian style, which is often the opposite of T.A., ie strong trend can be longterm bad. Pessimistic or skeptical sentiment is usually good (opposite of mainstream view or mood), or usually it means more money is left at sidelines.
BITSTAMP:BTCUSDEducation
by citsvar
The Contrarian Trader - Going Against The Crowd Have you ever noticed that when you speak to other traders about the market, your view tends to be the opposite view a lot of the time? You think the market is going down when they think it is going up, and vice versa. Going against the crowd can be looked down upon by traders, as the majority of them will question your motives or reasoning and tell you that "the trend is your friend." However, it is possible to profit in the markets by trading against the crowd, as the markets rarely go up and down in a straight line. You might just have a contrarian style and way of thinking when it comes to trading the markets, which is perfectly fine as there is more than one way to be consistently profitable trading the markets. In this post, we will delve further into this trading style. Contrarian traders base their trading strategies on the underlying principle that the market tends to overreact at both extreme highs and lows (supply and demand). These traders see these extremes as opportunities to profit from sharp reversals that can occur when the market corrects from a recent overreaction. All markets are looking for areas of fair value; in other words, buyers and sellers are constantly vying for balance in the markets. If the price of a product has gone up too high (overbought), the demand for that product will come down, so as the demand comes down, the price comes down with it. On the other side, if the price of a product has gone down too low (oversold), the demand for that product will increase, so as the demand goes up, the price goes up with it. In both cases, the price will eventually go to an area that buyers and sellers are satisfied with (fair value), and after some time, the market will look to trend again, either to the upside or downside, and the cycle continues. A trader taking a contrarian approach will constantly look to determine when the market has reached a level that cannot be sustained with either more buying or more selling. This is why contrarian traders are usually seen as going against the crowd, as this style goes against the current market trend. Taking a contrarian view to trade the markets requires a very disciplined approach and precise analysis of the market to determine optimal entry and exit points for trades due to the trader trading against the current trend. Contrarians' analysis methods can come in the form of technical, fundamental, or market sentiment. Technical Contrarian Trading Technical contrarians typically specialise in going against current trends, not following them. Therefore, when used by a contrarian, their technical analysis tends to be employed to look for situations that are primed for a significant market reversal. These can be in the form of chart price action or technical indicators. Price action reversal trading Reversal traders strive to pinpoint the moments when the market will change direction; these are mostly known as 'market tops and bottoms'. These traders anticipate a reversal at these market extremes, as they tend to take the other side of the crowd's market view. Contrarian traders will often look for reversal patterns that tend to take place near market tops and bottoms; candlestick patterns such as 'morning/evening stars' and reversal chart patterns such as 'double tops/bottoms' are very popular price action confirmation signals for contrarian traders. A key benefit of these setups is that they provide great risk-to-reward opportunities for contrarians due to the fact that the trader can place their stop loss just above or below the market high or low to potentially earn multiple amounts of their risk if the trade does not get stopped out. Double Top Morning Star Indicators Contrarians might use oscillators that can help them identify overbought or oversold market situations that are due for a reversal. Oscillators operate by plotting the output of that specific indicator between two extreme values. These two extreme values are used by the trader to help predict the overbought and oversold points in the market. The Relative Strength Index (RSI) or the Stochastic Oscillator can both be used for this purpose. Moving averages and their crossovers, or a related technical indicator like the MACD, can also be used in this manner. These also provide traders with great risk-reward opportunities, as oscillators usually (but not all the time) provide overbought and oversold signals near market tops and bottoms. RSI and Stochastic Oscillator Fundamental Contrarian Trading A contrarian trader that uses fundamental data in their trade analysis might use the release of major economic data to enter or exit a position. This can be a country's central bank interest rate decision or a country's gross domestic product (GDP) reading as a contrarian indicator. An example of this would be that instead of entering a long position in a product after an interest rate hike, the contrarian might wait for the release of the data and then sell the product once it has reached a certain overbought level in response to the favourable news. They would do this in anticipation of the market buyers exiting their long positions to profit-take as the upside momentum starts to fade and the profit-taking activity sets in. The same goes with a negative data reading; instead of entering a short position with the crowd after the negative reading, a contrarian trader might wait for the release of the data and then enter a buy position once the product has reached a certain oversold level in response to the unfavourable news. They would do this in anticipation of the market sellers exiting their short positions to profit-take as the downside momentum starts to fade and the profit-taking activity sets in. US Dollar Index: US Pending Home Sales for June 2023 Market Sentiment: Contrarian Trading Contrarians use this to assess the overall mood or sentiment of market participants. This is particularly crucial to contrarian traders when it is overwhelmingly positive or negative, as these could indicate an impending market reversal. Famous contrarian trader and investor Warren Buffet has a saying: "Be fearful when others are greedy, and greedy when others are fearful." When you hear this quote, you can't help but question if he has a point, as on average, around 75–80% of traders are unprofitable. Monitoring the crowd’s mood or sentiment gives the contrarian the insight and resolve needed to determine an ideal entry point for initiating a trading position. The psychology behind the crowd’s position is also very important, since excessive optimism in a rising market or constant pessimism in a falling market are well-recognised signs of incoming market reversals that a contrarian trader looks for. Psychology plays a key role in all markets because supply and demand factors reflect the different opinions of participants in the market. In practice, applying the contrarian theory means looking for situations characterised by very one-sided or "crowded" market psychology. This allows smart money to call market reversals ahead of the actual countertrend market movement occurring, and contrarians typically set up their trading plans to reflect this understanding. Risks and Challenges of Contrarian Trading Contrarian trading carries significant risk. A market that continues trending in one direction longer than a contrarian trader anticipates, potentially leading to severe losses. Effective risk management is paramount in contrarian trading. Traders should use strict stop-loss orders to limit potential losses and take-profit orders to secure profits when the price moves in the desired direction. This makes accurately predicting market reversals quite challenging, and contrarians can get severely burned trying to pick tops and bottoms, especially in aggressive bull or bear market runs. While technical analysis tools can offer valuable insights, they are imperfect and should be used with other forms of analysis. Additionally, contrarian trading often requires a great deal of patience, as the market may take time to correct and profitable opportunities may not present themselves immediately. Bitcoin's Bull Market Run 2021 Contrarian trading may not be suitable for all traders. It requires a high level of expertise and very quick thinking under stressful conditions, along with the fortitude not to get influenced or pressured by other traders. A trader that is limited by these requirements and trades this way will have very inconsistent results that will leave the trader feeling guilty about losing money due to trading against the market and will most likely quit due to the frustration from these losses. Contrarian trading is a strategy that can be highly profitable if used correctly. However, it is important for traders to approach this strategy with caution and a clear understanding of its risks and limitations, and most importantly, to understand that the market must be respected; otherwise, it will humble you very quickly. Correctly identifying potential opportunities to take contrarian positions takes dedicated planning in setting entry and exit points and managing risk correctly. If all this is done consistently, traders can increase their chances of being profitable by trading this way. BluetonaFX  
Education
by BluetonaFX
4
Power of Investing lies in your Individual Method Everything can be thought. But not everything can be learnt. Developing a risky instinct in investing is not something you learn. It’s something you are born with. Then you are given the power to share it. Agree? Probably not. It’s understandable. I went into stock trading not because I dig and sturdy deeply into companies’ financial and books at first hand, or mastering the art of options trading, rather I went into it simply because of self possessed gift of intuition to make risky calls that contradicts the majority, which often turn out favorably. Investing is a game, not a gamble. Contrary to the general method of investing, I buy a stock based on instinct then I start digging further in its books and financials to justify the instinctive decisions. Yes, I often lose. But yes, I often gain more. The reward comes from balances and checks that falls in favor of more profits at the end of the day. Take an example, on a 3 day stretch Oct 25th-28th, we all witnessed over 95% of stocks thrown downwards to a darkening red (nearing all time lows). Meanwhile, calls on Ford, GE, and Kodak (I made back in July when the market downgraded them to “Strong Sell”) kept a shiny bright green of blocks (upwards momentum). Now that was some risky calls that paid off. So it begs to ask… What exactly is the rule in stock investing for winning profits? Are there standardized rules to follow? And are these rules created by the 10% of winners, and gets passed down for the mass to follow? There’s the old saying: Read all that works, but never follow them, there’s a reason it only works for the less than 10%. (OK I made that up, but its true). The power of investing lies in your individual method... not the market (standards).
NYSE:FEducation
by RiskyInstinct
1
Trapping Breakout and Retracement TradersThis is by no means to be anti-breakout/anti-retracement. I find these entry methods as a valid entry method. As valid as it is, the triggers for such entry method are mostly obvious hence easily to be taken advantage of by the institutional traders. For breakout traders, how these banks would trap is the normal fake breakouts. We all know this as it is a guarantee that it is part of a retail trader, to be the receiving end of this stop hunt. Even if the breakout turns out to be the start of a trend, the institution would tap into the breakout traders stop-loss first (if there is not enough liquidity) before the move continues away from the breakout level. For retracement traders (who prefers the price to retrace first upon the breakout before entry) are not safe with this stop hunt as well. Whatever triggers it was, the stop loss for this traders tends to reside the recent highs or lows of the underlying move. In this example, let's assume the trigger was a bearish engulfing candle. The stop loss would normally be a few pips above the high of the candle. This is just my personal preference with all due respect for those who trades breakouts and retracements (and I am sure some of you made tons of profits trading this way, I just can't make it work and I never able to be comfortable with it, for these reasons I tend to fade breakouts and avoid "retracement" and "continuation" trade triggers respectively. Read my other posts on that has titles like "Navigating the Market" and other educational posts which I share how I navigate the market to eliminate the noise and finding the optimal time to trade.
OANDA:XAUUSDEducation
by sufiansaid
BA: Speculative at New All-time High with Contrarian Long-term POnly 2 of the DJIA components are currently at new all-time highs: BA and PG. Boeing gapped and ran up on earnings news with a boost from HFTs and buybacks. Currently, the number of shares held by institutions is dropping. Vanguard, Blackrock, Price T Rowe, State Street, Capital World Investors, Northern Trust, all giants of the Buy Side, have lowered held inventory in recent months. The stock is at a speculative price as smaller funds buy heavily and buybacks of up to $14 billion move price up. Whether this will be a good strategy for BA this year remains to be seen. The chart is the Long-term Trend Monthly chart showing the severity of the speculative buying. Also you can see the Cycle chart pattern using the DPO indicator with a failure to trough V shape. Volume shows a steady decline as well. These are contrarian indicators to what price is doing.
NYSE:BAEducation
by MarthaStokesCMT-TechniTrader