"Buy when there's blood on the street" - Warren Buffet
There's a high chance you've already encountered this term on the internet before. At its core, this strategy says that it's always best to buy an asset at its low, ideally, after a huge dump, and then to wait until the market price recovers and fix the profits.
History
There's historical evidence of the first ever contrarian trading executed by Nathan Rothschild. In the summer of 1815, in the midst of the Waterloo battle, stock exchange investors were craving to receive the news of who has won the battle to take action. Rothschild's courier managed to deliver the message faster than anyone else's - the British have won the battle. What Mr. Rothschield did was he sold British Governmental Bonds in massive amounts, thus dumping their price, because all the other investors saw his action and quickly followed suit. In the immediate aftermath of the crash that happened, he used his agent to buy the Bonds back at the low price before the investors knew the truth about the battle. Sources say that he later made billions of that trade.
The gist of contrarian investing
Basically, a contrarian investor simply does the opposite of what other traders and investors do. Whenever the asset's price falls, contrarian investors see it as a good moment to buy it. Moreover, such investors sometimes do profound research to obtain a clear understanding of the asset's intrinsic value and realize whether the dump leads to it being undervalued or oversold. With cryptocurrencies where the rates can easily go up and down for good 10% daily, this strategy is more worthy to consider than with traditional stock market, which is why a lot of VHCEx traders seem to use it, as we see active buying every time a coin dumps.
Famous cases of contrarian investing
In the '90s Donald Trump has made his first purchase - a hotel nearing bankruptcy in a devastated district of New York City. He made a bet on the district and overall economic situation recovery and won. Find time to watch about this story in the first part of "Trump: The American Dream" series.
In the midst of 1974 continuous bear market, Warren Buffet bought a stake in Washington Post Company which led to more than x100 in 2013 when he sold this stake to Jeff Bezos.
In 1992 George Soros [made[(https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp) a massive short trade on British Pound to profit around 1 billion USD in a single day with the same strategy. This event ultimately led to the renovation of the banking system of England.
In the following article, we'll elaborate on the contrarian trading strategy and see what its downsides are, how it works with cryptocurrencies and what takeaways our traders may see in the current crypto market.
So far, enjoy your fee-free trading at VHCEx. Your VHCEx team.
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