LeoGlossary: Contrarian Investing
Contrarian investing is a strategy that buys and sells assets which goes counter to the present sentiment. This is consider to be going "against the trend".
The mindset of a contrarian is that market participants get more overzealous at the peaks and fearful at bottoms. When people FOMO in, they exhaust their resources on the way up, meaning the peak is near. In this instance, there is no place to go other than down.
At the bottom, fear took over to the point where people moved mostly to cash. This means there are few securities left to sell. It is also the point where bottoms form.
Trends tend to be used in technical analysis. People look at charts and draw trendlines to determine trade entry points.
They can also be used in fundamental analysis by looking at broader trends. For example, the trend towards electric vehicles (EVs) is causing disruption in the automotive industry. This has caused many people to pile into Tesla.
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