Balaji As a trader,speculator and Investor- Balaji have more than a decade of experience trading commodities, stocks and Fixed income securities including as a senior trader with Vexes capital.He also mentors or teaches investors, traders about Financial markets and provide professional training for individuals combining Institutional experience with a technical grasp of seizing market opportunity. Since leaving the Vexes capital and Newyork city,Balaji has been working as Trading coach along with presenting seminars and writing for a number of publications.

Investing in Bad times – A Short Description of Contrarian Investing

1 min read

2015 Trading year started with a bang as I warned in my previous article that investors should brace for volatility. Last week was a hardcore ride in global markets, one thing you should remember that if you made money last year it’s not a real deal. This year will be one of the most unexpected and unanticipated game. It will be tough, rogue and brash

Global economic and geopolitical events lined up in a different way this time ever since 1982 commodity glut. The best way to approach this year is being a skeptical contrarian Investor and I hope this article will shed some light into most important and less known method

Guts of a Contrarian Investor
Baron Rothschild, 18th century British nobleman and banker once said “Buy when there is blood in the streets, Sell when everyone is rich “. This quote gives an uncanny insight into the tactics of a contrarian investor, being a contrarian investor is not so easy, but the profits that come after this method will be overwhelming. A contrarian investor goes opposite of the crowd at the right time and makes a killing in the market! .For example if Everyone is bullish on the market, fully invested without further purchasing power ,market will reverse and turn into a bloodbath which distorts the real value of a stock, Creates an opportunity for a value investor .

 
Going against the Crowd
Contrarian as the name indicates, trying to do the opposite of the crowd. They search opportunity in distressed selling and euphoric buying. They assume that markets are usually wrong in their extreme highs and lows, more the price extremes, more confused the market and opportunity for contrarian

Bad times give best plays

Philosophy of contrarian, always look for bad times and price extremes without any sufficient reasons. Especially after a short-term panic or secular market crashes, majority of the stock values distorted without any fundamental background vice versa for bears-after an extended up move or euphoric condition stocks will be overvalued. So in contrarian’s terminology “Bad times are the best times,Good times are the bad times”.when everyone run, it’s better to walk!

Some examples of the contrarian play
Gold is a recent example how a contrarian investor could have nailed it !
tf1

More recent and familiar example is bank nifty around 2013
tf2

Simple Practical application of contrarianship:

  • Search for most extreme sell off or buy off recently
  • Look for price extremes
  • Analyze the reason behind the movement
  • Use commonsense to understand whether the movement is valid or hoax

Conclusion
There are risks to contrarian investing-Investors must make sure the market is indeed wrong, To play against the current opinion, some of the famous contrarian investors didn’t chased the market rather let the opportunities come to them .If applied with proper research or valid method, Contrarian investing gives best profit!!

Balaji As a trader,speculator and Investor- Balaji have more than a decade of experience trading commodities, stocks and Fixed income securities including as a senior trader with Vexes capital.He also mentors or teaches investors, traders about Financial markets and provide professional training for individuals combining Institutional experience with a technical grasp of seizing market opportunity. Since leaving the Vexes capital and Newyork city,Balaji has been working as Trading coach along with presenting seminars and writing for a number of publications.

Ultimate Guide to Momentum Trading

This a brief video guide for the momentum traders which explains right from what is momentum trading ,how momentum trading is related to diffusion...
Rajandran R
18 sec read

What We Can Learn from the Sideways Market –…

What is more required during a sideways market is frequent evaluation of your strategy, keeping your emotional balance in check, and not getting into...
Rajandran R
1 min read

What We Can Learn from the Sideways Market –…

The sideways market occurs when markets are not dominated by the large players and instead traders attempt to dominate the market and keeps the...
Rajandran R
57 sec read

One Reply to “Investing in Bad times – A Short Description of…”

  1. sir i discovred that i am an price action trader after reading some of your articles. i was blindly playing trends without knowing that there is a lot of interesting articles about this subject . your explanation of the subject is down to earth and practicle. i love the way you explain things. thank you .

Leave a Reply

Get Notifications, Alerts on Market Updates, Trading Tools, Automation & More