Contrarian Investment Guidelines
Here are a couple of suggestions, I am in no way going to
suggest that these suggestions encompass everything one
needs to know about trading but it can seriously help you
become a better trader/investor.
1) All popular magazines, news articles and TV stations
should be used only for getting information on what you
should not do, in other words if they tell you its time to
buy gold, its time to get ready to sell, if they tell you
the market looks like its going to crash, we are probably
close to a bottom etc
2) Spend time learning TA, this is very important. We have
just updated the investor tools section on our web page.
There are many educational resources there now, so use them
it costs you nothing and took us time to put them up.
3) Have a plan. Donít be a fool and sit there wishing for
that big kill, those that do so, always catch a falling
dagger, and everyone knows what happens when you do that.
4) The plan should include profit targets on each and every
trade, plus and this very important, an exit plan, in case
the trade does not work out.
5) Never ever, ever I will say it one more time, play
Options only, it should be part of your investment plan but
not your only plan. You are far better of playing futures if
you are going to waste all your money on options only,
futures are much cleaner, less slippage, less spread and you
can get a feel for it because you can study the pattern of
one market. I am not saying that everyone should get up and
play futures, but if you are going to be a fool and play
only options, then the wiser thing to do would be to learn
futures and attempt to get in tune with one of the markets
ie Dow futures. In addition remember the saying ďA fool and
his money are soon partedĒ; having said that options are
absolutely fabulous instruments to lock in spectacular
Let me talk about something I mentioned some time ago. I
stated that with proper money management one could lose his
entire options portfolio and still walk away with a profit.
We will use a 100K portfolio for this example
10% is 10K
Okay you lose the entire 10K by playing options idiotically.
Now you play nice and safely with the other 90K and you make
30% for the year. Donít say itís not possible; all of you
who have long term positions in Gold are up more than 30%
this year alone. Just catch the major trend and follow it.
So you make 27K that brings the total to 117K but lets say
you make only 20% that brings the total to 108K, you could
even make 15% and still walk away with a profit.
The key here is that you live to fight again and then you
can take some of these profits and play options once more
6) Learn to relax; if you donít relax itís really hard to
7) This last rule many of you might or might not agree with
me, help one person in your life time and your rewards will
be 100 fold.
comments were made by Sol at the end of 2002)
A true measure is that you buy because the price is at
mouth-watering levels, itís in a strong sector, and you
checked the charts. Your buy passes the basic technical
importantly, though, is that even though everything looks
good, you are scared. You are thinking, "Hey, am I the only
one buying. I don't want to go against the crowd. A true
Contrarian always feels this fear and you have to fight it,
and say, "Now is the time to buy."
you are overly confident, it's time to flee. Never get a hot
head and think you know it all. Even the best can be taken
out. Keep your mental stops tight in this volatile market.
Let me expand on the subject:
investing is really about emotions. You are overcoming your
emotions and playing on the emotions (fear or greed) of the
crowd by taking a radical position.
you take a position and people look at you with disdain or
shock, you know you are doing the right thing!. When they
pat you on the back or on the rear it's time to flee for the
exits Gold and silver and commodities are still hated with a
passion. Therefore, one has to understand that the huge hate
for this sector makes it the best contrarian play ever. Get
it? Buy low. Sell high.
Other interesting Articles
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never been in A true Bear Market
Table II- Central Bankers
Table III- Inflation good or bad?
Table IV- Bear Market Etiquette
table V- The Fed
A day late and A