Tread the untrodden path to make more money

Forex Trading | by ForexCycle.com | Sunday, 14 June 2009 02:46 UTC

They say if you walk the same path as others do, you reach the same destination. People succeed enormously by doing things differently and not by doing different things that others do.

To make money on trading, one can have many strategies. From the safe strategy to the street smart strategy. From a long term strategy to the short term one. From a "sheep strategy" (follow the shepherd) to the "rebel strategy" (take a different view, backed by intelligence).

The rebel strategist is an investor who dares to think different, quite often out of the box. He does his fundamental research. He also does the technical analysis. He goes beyond and follows his intuition. He trusts his intuition in doing something that the market is not doing. He sees the half glass full when others see the half that is empty. He sees it white when others look at the basic colors. He smells an opportunity when others predict doom.

The power of contrarian thinking comes from the daring to be called "stupid" by others who cannot see the brilliance of the thinking. Or the rationale behind it. Simply because the contrarian thinker does not follow the "trend". He would like to be the Columbus who discovered America. Not follow the traditional routes. The contrarian thinker is not an idiot. Simply put, he has a perspective that is actually, "uncommon sense".

The "market sentiments" may predict that a particular sector is doing badly or expected to do badly. Or, that a particular sector is doing good or expected to do well. Share prices of all companies in that sector simply suffer / benefit from that perspective. Investors normally look for "tips" to invest or disinvest that ride on these perspectives. Not the Contrarian investor.

The Contrarian thinks differently. He is able to see the prince when others see the frog. At bad times, people tend to believe the bad news more than the good. Not the contrarian. He looks for opportunities that get buried by these perspectives. Intrinsically good companies whose market prices get depressed way beyond their true worth, weighed down by the market perspective. The contrarian looks for such "dust covered" stocks, picks them up and just waits for a time when the dust will surely fly off and the stocks start shining again. He then is able to sell these off at a huge margin. Similarly, the contrarian is also able to take a "sell position" much before others start seeing the trend of falling prices and makes money by bucking the trend.

Basically, the contrarian refuses to flow with the tide. He is able to get a 35,000 feet view when others still trying to raise their heads above the crowd. He is smart enough to profit from incorrect assumptions made by regular investors about the intrinsic value of companies or the long term prospects.

Welcome to the world of Uncommon Sense. To be a contrarian in a world of conformists. AND, to benefit from it. Be a Warren Buffet. It's in the thinking.

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