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How to Be a Contrarian Investor

19 January 2020 No Comment

Investors come in many different flavors. There are those who like to watch the stock market every day, making money off the slight changes that happen to the price of a security. Other individuals like to experiment with currencies, making cash in the Forex landscape. You can even hand the complicated parts of your trading strategy over to a financial advisor if you prefer to take a more passive approach with your wealth-building strategy. One option for investing that most people don’t fully understand, is contrary investing. Basically, this market timing strategy is all about reversing the crowd-think that often stops people from making the right decisions with their cash.

Learning How to Be a Better Trader

When you’re learning how to trade stocks, the first advice you’re likely to get is that you should sell when prices are high, and buy when they’re low. That makes a lot of sense, but not many follow this rule. Instead, as certain markets begin to climb, people get sucked into the herd mentality – feeling more optimistic about more popular securities. At the same time, when the market goes down, investors generally panic, and end sell their securities – particularly if they see the people around them doing the same thing.

However, if you can explore the benefits of contrarian investing, then you might be able to buck this trend, and take a different approach. This kind of investor will buy stock when other people are selling, because they’re paying attention to the fact that a flood of sales will usually mean that the market will soon start to recover. Additionally, these experts sell when other investors are becoming more optimistic and buying – because they know that there’s a good chance that the market will reach its peak and enter a dive.

How Do Contrarians Invest?

There are many different ways to get started as a contrarian investor. However, you’ll often find that you spend plenty of time evaluating surveys and polls that highlight either extensive optimism or pessimism in the industry. The idea is that everyone is moving in one direction, you do your research and then potentially move in the opposite direction. While it can be difficult to overcome the desire to follow crowd mentality – it could be an excellent way to boost your chances of making more money in the long-term.

If you decide to become a contrarian investor, then you’ll need to figure out how you’re going to keep track of the movements of the market. You’ll need to pay close attention to investment news, and make sure that you’re taking the actions that are suitable for your needs – rather than just following group think. Eventually, you’ll come up with a unique strategy that works for you – just any other kind of trading expert. Just remember that there’s more to being successful in the trading world than always doing the opposite to what other people in the same space are doing. You’ll need to learn how to understand the industry, and make sure that you’re making decisions based on logic, not emotion.

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