1. If the sentiment runs counter to the prevailing trend, stay with the trend or at least avoid going counter trend. For example, the prevailing trend is down, but the sentiment has not gotten as bearish as the downtrend would suggest. Avoid going counter trend in those situations.
2. Traders like to de-risk ahead of a 3 day weekend. They like to re-risk after a 3 day weekend. The buying that comes in after a 3 day weekend is often emotional, hurried, and irrational.
3. Weak markets do not give you much time to sell dear. Strong markets give you plenty of time to sell dear.
4. What you think is contrarian could be accepted market wisdom. The accepted market wisdom during this downturn since SPX 1075 has been that we are oversold and due for a bounce. Those who bought at 1075 are still waiting for that bounce. Playing counter trend doesn't make one a contrarian.
5. Staying with the trend and riding profits in an entrenched trend is much harder to do than to play for reversals in a deeply oversold or overbought market.
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2 comments:
Brilliant observations.
What is brilliant ???
The word "trend" should be forbidden because you know afterwards whether there was a trend or reversal.
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