Some of the best gains when investing are made when investors do exactly the opposite of what the herd is doing and bet against the prevailing sentiment.
In other words, buy or invest in a stock or crypto, for example, when others are selling and the price is going down. This is referred to as being a contrarian investor.
What is a Contrarian
Contrarian investing is an investment style in which investors purposefully go against prevailing market trends by selling when others are buying, and buying when most investors are selling.
Contrarian investors believe that people who say the market is going up do so only when they are fully invested and have no further purchasing power. At this point, the market is at a peak. So, when people predict a downturn, they have already sold out, and the market can only go up at this point.
Breaking Down Contrarian
Contrarian investing is, as the name implies, a strategy that involves going against the grain of investor sentiment at a given time. The principles behind contrarian investing can be applied to individual stocks, industry as a whole or even entire markets. A contrarian investor enters the market when others are feeling negative about it. The contrarian believes the value of the market or stock is below its intrinsic value and thus represents an opportunity. In essence, an abundance of pessimism among other investors has pushed the price of the stock below what it should be, and the contrarian investor will buy that before the broader sentiment returns and the share prices rebounds.
Contrarian investors often target distressed stocks and then sell them once the share price has recovered and other investors begin targeting the company as well. Contrarian investing is built around the idea that the herd instinct that can take control of market direction doesn't make for good investing strategy. However, this sentiment can lead to missing out on gains if broad bullish sentiment in the markets proves true, leading to market gains even as contrarians have already sold their positions. Similarly, an undervalued stock targeted by contrarians as an investment opportunity may remain undervalued if the market sentiment remains bearish.
Is Bitcoin Closer to a Bottom?
This video illustrates clearly that we are close to reaching the bottom of the 200-week average of Bitcoin indicating it's a good time to buy.
It's my belief the very fact that no matter how many times the media and financial experts have declared Bitcoin is dead it still has been the best performing asset in history and each new low and high is still higher each year. I'll let you decide.
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!tip
Thanks man. Just curious what you think of my predictions for crypto in 2019
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This is a real thoughtful insight into investment! Thanks @luzcypher
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