Imagine – the world is crumbling, the banks and the entire financial system looks completely fried… left for dead. And you decide to plonk down $5 Billion on a failing investment bank? Wait…why would you be so insane?

Because you’re a contrarian – like Warren Buffet, who invested $5 billion in the investment bank Goldman Sachs in the midst of the 2008 Global Financial Crisis. Warren Buffet is one famous contrarian, who claims the best time to buy is when the shortsightedness of the market has beat down price. But Buffet is one of many famous (and wealthy) market participants who strongly believe in going against the herd. (See Sam Zell, Jim Rogers, Eduardo Elsztain, Paul Tudor Jones, David Dreman, Marc Faber, John Templeton, Mark Ripple and none other than George Soros – “The Man Who Broke The Bank of England”).

In this episode we tackle contrarian trading – why is it so difficult to go against the crowd? And why does it seem to pay off for some of the world’s most famous investors (or does it?) Can you use contrarian principles in your every day trading or is it just a worthless academic idea – fun to talk about, but not very useful?  

http://media.blubrry.com/2traders/content.blubrry.com/2traders/2Traders_-_EP15_Contrarian_Trading.mp3

Download (Duration: 30:05  / 34.4 MB)

In this episode:

00:48 – contrarianism

03:52 – expectations of the market

07:41 – is it exceeding expectations or not?

09:48 – technical trader

11:28 – Glenn Stevens

12:25 – is there a shortcut?

13:43 – fundamental calculus

16:15 – price structure

20:42 – herd mentality

23:42 – an old idea

25:30 – reversal signal

28:00 – don’t discard all other data

Tweetables:

You don’t need to interpret it, you just need to know when there’s a market shift. [Click To Tweet].

Use some data, rather than trying to go against the trend. [Click To Tweet].

Essentially, being contrarian means going against the masses – and, remember: most traders lose money [Click To Tweet].