Contrarian trading in a nutshell means profiting from crowd behavior. Most successful contrarians know that what this really means is understanding and then anticipating the dynamics between market contrarian indicator forex terbaru. The ideas that I am sharing in this post helped me to generate consistent profits over several years of intraday FX trading and helped me become one of the top 14 Trade Leaders in Currensee.
It was once one of the largest FX trading networks in the US, with thousands of live trading accounts connected to it. The Basics of Contrarian Trading Contrarian investment and trading is about doing things differently. In essence it means identifying what the majority of market players are doing, and then doing the opposite. For example if everyone is buying an asset the contrarian is selling and vice versa.
A common misconception is that contrarian trading is about trading against the trend. Contrarian trading is not about trading against the prevailing direction of prices. Rather it is about trading against the majority of market participants who are behaving as a crowd. For example, if the majority expects that a trend will reverse, the contrarian trader will continue to trade in the direction of the trend. The first step towards being a contrarian is to understand the market participants in terms of their performance and sophistication.
Figure 1 below shows how a contrarian would typically classify market participants. By this I mean one person’s gain is another person’s loss. Within this space the general consensus is that market makers are consistently making money and the crowd is consistently losing. For example, one subgroup of the crowd is the community of retail traders. The corresponding subgroup of market makers is those financial institutions and brokers that take the opposite side to the positions of retail traders.
Table 1 and 2 shows one recent US study in which retail traders as a whole are consistently losing. There are several reasons that contribute to the poor performance of this subgroup. They are trading on prices provided by market makers and are not part of the price formation process. Retail traders are probably the least successful subgroup of the crowd.