Trading against the market trends has been a trend itself for some investors. If a stock is in its low point, then these investors will buy it and if it goes up, they sell it. Quite the opposite you must say, but that’s the point. It’s called Contrarian Trading.
See also: Underlying Principles of Trend Trading
For some years, this has been a strategy for a minute number of investors. It has brought them luck and of course misfortune because it’s going against the mainstream and if failed, then they simply fail but if the falling stock surged, then it’s pretty much a big luck.
Going with this trend of investing can cause more cons than pros because it is undeniably faulty and risky. Its inconsistent progress can result to a major downfall to any investor’s shares. Moreover, if trading is already risky, this is adding more risk to the present one.
Contrarian trading from the world contrary is simply going against the recommended trend. One flaw of this is once it failed, it would be disastrous for the investor. You lost your money, the stock failed and it will be hard for you to bounce back to the top.
The mentality behind the trend is these investors is when a market goes up and they’re all invested on the stock will lose purchasing power and will have a hard time coping up once it fall. To add, once they fall, it safe to say for them that they’re not that affected because they sold the stock before it even get to fall.
A tip about this is prices never go in any direction possible. In the bull market there are pullbacks and run ups in the opposite market of bear. Once you attempt to buy from the bull market, the prices would be low but that’s going with the market, contrarian trading does the contrary.
Is this kind of trading recommended? Probably, not. It is risked filled and entering in to such kind of strategy is dangerous for your investments and would you want to risk something that involves your money? Not to mention that you are risking that is pretty much hazardous than what it is. In some ways, it can be good and worth the try but do not try making it a habit as a trader because again, it’s risky.
Read also: 10 Types of Investment Risk
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