THOUGHT FOR THE DAY: CONTRARIAN THINKING
If you have read this thread you will have seen lots of times I size up what the majority opinion is and look for a signal that allows me to do the opposite. Contrarian thinking was something I was introduced to early in my trading career and it has stood the test of time in every TF.
If the minority in any field of human endeavour take the majority of the spoils, it stands to reason that opposing the common view is going to be where the big money is â provided you understand the need for timing.
When I learned Elliott it was taught as a way of discovering and predicting waves of optimism and pessimism by using Wave Patterns with Fibonacci Timing & Price Ratioâs. In real life itâs a lot easier to write about the theory than demonstrate the practical value of Elliott e.g. Prost & Prechter have a stellar track record of getting their timing well wrong.
I remember revisiting Elliott about 6 yrs back and trying the best âtimingâ service to see if I could pick up any ideas on timing. This guy had a fantastic track record so I paid for 4 mths and watched him get every single trade wrong⦠stopped out. Funny thing was I got every trade right because I thought he put his stop in the wrong place.
He initially got the direction of the next wave correct but after he was stopped out he couldnât read the structure and changed his mind, reversing and getting stopped out again as he watched his initial prediction reach fulfilment. His whole secret was Timing. It had worked like a dream for years but now the Midas touch had deserted him. Afterwards from time to time he sent me emails calling for a major reversal in the Dow⦠and I always did the opposite to his call.
What he was doing was using Fibonacci timing and looking back over years to find correlations, which were displayed as a histogram. And sure enough it worked like dream⦠until it became a nightmare. His Elliott pattern always matched his Timing⦠it looked perfect⦠so many correlations. After about 2 years of disastrous results he dropped the timing model to a less prominent role in the decision making process. Too much emphasis on Timing or Price or Volume will usually end in tears.
At this time the stock market has the highest level of short sellers in the past decade and as the market has to do whatever it can do to prove the majority of people wrong, this is looking like a good time for a potent reversal.
For us, as far as Fx is concerned, if you can pick up from the study of standard TA what the majority view is in a PA pattern or the daily or 1 hr chart view is⦠look for signals to do the opposite. Understand when to run with the herd as the TFâs roll over and learn how to reverse when it looks a one-way bet. It just takes a bit of refinement on the usual TA techniques and as you gain experience it becomes easier and easier to spot.
When a market makes a new high as in the Euro, most will play the long trade. I went top fishing because all the cycles were mature. But Iâm not so bloody-minded that if it goes up Iâm lost about what to do â Iâd find it easy to take the long and change my view AFTER the TFâs roll over. That way Iâm not lost, standing on the sidelines with holes in my PIB. As I said, taking the next âbusâ keeps you on the right side of the market but anytime you pick up what the majority view is â get ready to do the opposite. Thatâs where ET can be a great real-time sentiment indicator.
If you have read this thread you will have seen lots of times I size up what the majority opinion is and look for a signal that allows me to do the opposite. Contrarian thinking was something I was introduced to early in my trading career and it has stood the test of time in every TF.
If the minority in any field of human endeavour take the majority of the spoils, it stands to reason that opposing the common view is going to be where the big money is â provided you understand the need for timing.
When I learned Elliott it was taught as a way of discovering and predicting waves of optimism and pessimism by using Wave Patterns with Fibonacci Timing & Price Ratioâs. In real life itâs a lot easier to write about the theory than demonstrate the practical value of Elliott e.g. Prost & Prechter have a stellar track record of getting their timing well wrong.
I remember revisiting Elliott about 6 yrs back and trying the best âtimingâ service to see if I could pick up any ideas on timing. This guy had a fantastic track record so I paid for 4 mths and watched him get every single trade wrong⦠stopped out. Funny thing was I got every trade right because I thought he put his stop in the wrong place.
He initially got the direction of the next wave correct but after he was stopped out he couldnât read the structure and changed his mind, reversing and getting stopped out again as he watched his initial prediction reach fulfilment. His whole secret was Timing. It had worked like a dream for years but now the Midas touch had deserted him. Afterwards from time to time he sent me emails calling for a major reversal in the Dow⦠and I always did the opposite to his call.
What he was doing was using Fibonacci timing and looking back over years to find correlations, which were displayed as a histogram. And sure enough it worked like dream⦠until it became a nightmare. His Elliott pattern always matched his Timing⦠it looked perfect⦠so many correlations. After about 2 years of disastrous results he dropped the timing model to a less prominent role in the decision making process. Too much emphasis on Timing or Price or Volume will usually end in tears.
At this time the stock market has the highest level of short sellers in the past decade and as the market has to do whatever it can do to prove the majority of people wrong, this is looking like a good time for a potent reversal.
For us, as far as Fx is concerned, if you can pick up from the study of standard TA what the majority view is in a PA pattern or the daily or 1 hr chart view is⦠look for signals to do the opposite. Understand when to run with the herd as the TFâs roll over and learn how to reverse when it looks a one-way bet. It just takes a bit of refinement on the usual TA techniques and as you gain experience it becomes easier and easier to spot.
When a market makes a new high as in the Euro, most will play the long trade. I went top fishing because all the cycles were mature. But Iâm not so bloody-minded that if it goes up Iâm lost about what to do â Iâd find it easy to take the long and change my view AFTER the TFâs roll over. That way Iâm not lost, standing on the sidelines with holes in my PIB. As I said, taking the next âbusâ keeps you on the right side of the market but anytime you pick up what the majority view is â get ready to do the opposite. Thatâs where ET can be a great real-time sentiment indicator.
