Contrarian Approach to Day Trading

Contrarian Approach

to Day Trading

By

www.ProfitableTradingTips.com

http://www.profitabletradingtips.com/

When hysteria rules the

markets it is often profitable to

follow a contrarian approach to day trading.



Contrarians, in stock

trading, look for and take

advantage of temporary

market inefficiency, as do many stock traders.



However, the contrarian

approach to day trading often

lies on the opposite side of

those who studiously engage

in trend following in day trading.


http://profitabletradingtips.com/trading-investing/trend-following-in-day-trading

http://profitabletradingtips.com/trading-investing/trend-following-in-day-trading


In a contrarian approach to

day trading, traders seek to

understand both the

psychology of trading and the

fundamentals that eventually determine stock prices.



Profitable Inefficiency



If the stock market was totally

and absolutely efficient only

the fundamentals would drive stock prices.



However, traders as well as

long term investors look to

gain advantage by predicting

where stock prices will be in the future.



When news hits the markets

stock prices respond and

often overshoot and then correct.



When the news in

confusing, there can be a great deal of price fluctuation.



Long term investors think in

months and years and day

traders think in hours and minutes.



Each looks to gain profit from market inefficiency.



One of the best ways to profit

from the news in day trading is

to follow a contrarian approach.


http://profitabletradingtips.com/trading-investing/profit-from-the-news-in-day-trading

http://profitabletradingtips.com/trading-investing/profit-from-the-news-in-day-trading


Herd Mentality



Think of lemmings, those furry

little critters that periodically

run in herds over cliffs to fall into the sea.



Then think of the dot com

bubble some years ago, the

volatile market preceding the

2008 market crash, and other

times when herd mentality

drove stock prices up beyond what was reasonable.



The contrarian approach to

day trading takes advantage

of the “lemmings” that trade

up stock prices in the absence

of hard data or sell in panic

without looking at the margin of safety of a stock.



Profit for the contrarian lies in a

firm grasp of fundamentals and a

working knowledge of market

psychology. Profitable day

trading strategies commonly

have to do with profiting from

herd mentality.


http://profitabletradingtips.com/trading-investing/profitable-day-trading-strategies

http://profitabletradingtips.com/trading-investing/profitable-day-trading-strategies


The Fundamentals

Rule, Eventually



Although technical analysis

leads to short term

profits, fundamentals eventually govern prices.


http://profitabletradingtips.com/trading-investing/technical-analysis


It is in the reading of market

sentiment about fundamentals

and pricing that a contrarian

approach to day trading can make money.



A true contrarian picks his or

her trades. He or she looks for

overpriced or underpriced stocks to trade.



In this way the contrarian

approach to day trading

resembles a value stock

investor researching stocks

and looking for a margin of

safety and intrinsic stock value.



When a contrarian has a clear

view of where the stock price

will eventually land he can

look to where market

inefficiency creates opportunity.



The difference between value

investing and a contrarian

approach to day trading is the timeline.



Day traders will want to close

out their positions before the

end of the trading day so their

analysis deals with the shorter

term.



Mix and Match



Any and all day trading strategies can lead to profits.



Trend following, scalping in

day trading, and a contrarian

approach to day trading can make you money.


http://profitabletradingtips.com/trading-investing/scalping-in-day-trading

http://profitabletradingtips.com/trading-investing/scalping-in-day-trading


Profits lie in learning the

required skill set, doing your

homework, and being there at

the trade station when

opportunities rise.



For more insights and useful information about day trading

stocks, commodities, and foreign currencies visit





Contrarian Approach to Day Trading

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