Contrarian Definition: Tactical Investor Trading Methodology

Contrarian Definition Of Investing

Updated Feb 2023

The contrarian definition of investing is to buy when the masses are panicking and sell when they are happy. However, today’s contrarians, for the most part, fall under the category of “fashion contrarians” and they panic almost as fast as the masses. Hence the contrarian definition of investing for these chaps is no different than the contrarian definition of investing for the masses. In other words, they mumble the words, but when it comes to action, they are unable to walk the walk.

What is this all about anyway?

Contrarian investing is based on taking a position opposite to that of the masses. In general, contrarian investors get into an investment too early as their analysis is based on doing the opposite of the masses. In contrast, mass psychology dictates that you wait for the emotion to hit a boiling point, euphoria or panic before taking a position. Mass psychology involves studying what the masses are doing instead of just determining their current action is wrong and using that information to take a position in the opposite direction.

Mass Psychology Improves Contrarian Investing Results. Investors who adopt the doctrine of mass psychology will understand how to use market sentiment to their advantage. Mass psychology takes the principle of contrarian investing and then pushes it to the next level.

This is an archive of Sol Palha’s reports going back to 2016. This section closely examines the concept of contrarian investing and mass psychology. The latest 2020 articles can be found here Current Contrarian Articles.

Investopedia on Contrarian definition

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, industries, 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. An abundance of pessimism among other investors has pushed the stock’s price below what it should be. The contrarian investor will buy that before the broader sentiment returns, and the share prices rebound. Investopedia

Your dictionary on Contrarian definition

A trading theory that recommends making investments contrary to the apparent direction of the market or commonly accepted wisdom. The theory holds that if everyone is sure something will happen, it won’t. Contrarians also draw their conviction from the viewpoint that if everyone believes the market will rise, they have already bought. Thus, there are few investors remaining to create additional buying, which means it is likely that the market will decline. Some mutual funds have adopted a contrarian trading strategy as their primary focus. Yourdicationary