Contrarian investing is a dynamic field and not a static one. The assumption that it’s a static field is held by the new breed of fashion contrarians, whose only contribution to this field has been to glamorize it and distort the true notion of being a contrarian investor. These fashion contrarians are no different from those with the mass mindset; they only pretend to do things differently, but the moment fear or uncertainty is in the air, they flee for the exits like bandits being chased by the hounds of hell. A true contrarian in most cases understands the basic rules of mass psychology. If you are not familiar with these rules, you are doing yourself a disservice and should catch up on them ASAP.
At the Tactical Investor, while we embrace the concept of contrarian investing our true focus is on the joining the key rules of contrarian investing with the powerful concept of mass psychology. We believe this is the most robust system out there as psychology is the key driving force behind almost every human action.
We are going to provide a list of rules that we believe are the most important in terms of contrarian investing. It will provide both the novice and seasoned trader with ideas that should help improve your trading skills if implemented properly. Discipline and patience are the keys to successful investing; nothing comes easily, for if it did, everyone would be able to do what you are doing.
These contrarian guidelines by no means encompass all the rules associated with the concept of contrarian investing. However, they do provide you with a firm foundation on which to build your investment career.
1) Popular media (magazines, news outlets, newspapers, TV stations, etc) should be treated in the same light as toilet paper; it has some use, but its function is to perform a distasteful action. Thus use these outlets to determine what the masses are frothing about and what you should avoid or start getting out of or into. Remember the emotions should be at boiling point. You do not oppose the masses just because they started to jump on the bandwagon; its only when the bandwagon is overloaded and about to buckle under the load its carrying that you should look for an exit and vice versa.
2) Technical analysis plays a key…
