Contrarian Investing

by **winston** » Tue Jan 26, 2010 10:13 am

I normally start to become uncomfortable when my positions are being parroted on CNBC or are being pushed by the Analysts ..

At the same time, I also use "CANSLIM", "Momentum Investing", "Bubble Investing" etc..

So one of my challenge is, "How to ride a popular position but try to get out before the rest ?" ...

John Templeton mentioned that the best time to sell is when the short term buyers have just finished their buying.

Peter Lynch mentioned that "it's the stomach that makes the money not the brains".

Warren Buffett mentioned that the best time to buy is when others are fearful and vice versa ..

John Templeton also mentioned that the time to buy is when there's blood in the street ( including your own ).

So how does one become a good contrarian investor ?

What do you look for ? Besides the TA indicators ( which I'm not good at ), what do you use ?

What about Trailing Stop Loss ? And what % do you use for your Trailing Stops ?

What about the cloud in Itchy Mushrooms ?

Or the Box in the Trading Range ?

Or stand aside when you feel that 85% of the analysts are bullish ? Or Buy when only 25% of the Analysts are bullish ?

Please do feel free to pen your thoughts here. I would really like to hear your comments ..

by **winston** » Tue Jan 26, 2010 2:22 pm

TOL:-

One extreme of Contrarion Investing is believing that you are right and the market is wrong. The worst is to hold a big position and to go strongly against the market.

This is a very dangerous move. Instead, one should stand aside while looking for reasons why the market should go the other way and then wait for the opportunity to execute.

On the other hand, Traders are on the other extreme. Their motto: The trend is your friend until it breaks.

by **kennynah** » Tue Jan 26, 2010 2:42 pm

contrarian investing is not complete without proper risk management...

by **Musicwhiz** » Tue Jan 26, 2010 2:45 pm

My view is that "contrarian" investing is over-rated. Some people are contrarian in the media for the sake of looking/sounding different. But the point is we do not have to be contrarian just for the sake of it.

As long as your FACTS and REASONING are sound, you should have the requisite confidence. Being with the crowd or going against it should not give anyone any particular sadness or pleasure. Being independent and objective is important, but emotionally tough.

by **kennynah** » Tue Jan 26, 2010 2:49 pm

i'd say that contrarian investing is no more than an approach to investing just like value investing and technical investing... each comes with its set of risks and uncertainties...

i wont get too excited about any one of them...none of the approaches should have any significant advantage over the other... if it did, it would have become the holy grail of investing by now...

by **millionairemind** » Tue Jan 26, 2010 2:50 pm

You know what JL said more than 70yrs ago.

"THE MARKET IS NEVER WRONG, OPINIONS OFTEN ARE" :mrgreen:

by **Poles** » Tue Jan 26, 2010 8:23 pm

kennynah wrote:contrarian investing is not complete without proper risk management...

sometimes i am also extreme contrarian....then again No Risk No Gain.....no free lunch in this world
just add....most Heroes are great risk takers.....sometime sway become Zerooo......

by **kennynah** » Wed Jan 27, 2010 3:16 am

poland wrote:
kennynah wrote:contrarian investing is not complete without proper risk management...

sometimes i am also extreme contrarian....then again No Risk No Gain.....no free lunch in this world
just add....most Heroes are great risk takers.....sometime sway become Zerooo......

agree.... wana hiong.... be prepared for the worst....

by **winston** » Wed Jan 27, 2010 7:37 am

Now that there's some fear in the air and so many people are expecting a correction, I'm starting to feel a bit uncomfortable again.

I never like to be together with the crowd but I'm telling myself to ride this trend until it breaks.

Some signals that I would be watching would be the bounce off resistances, breakouts from down trend lines etc.

Maybe I use to trade leverage instruments so I tend to focus on minute by minute movement but not keep the big picture in view...

I'm forcing myself now to look at the big picture and see how long this downcycle may play out, rather that to zig when everyone is zagging.

by **winston** » Wed Jan 27, 2010 3:11 pm

Dear All,

A short note to let you know that I have moved the various comments on Jesse Livermore into his own thread, located in the Market Guru section.

Take care,
Winston

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