Why Does Being Contrarian Yield Results?
So you’ve been following the crypto market pretty closely. You identified a perfect entry point. But soon after you entered, the market went the opposite way. There was a trend reversal. It was impossible to predict without the right technical analysis or tools. Everything was pointing to a massive surge ahead for you and others.
Don’t worry. This happens often. In fact, tens of thousands of investors fall into this trap every year.
However, you can avoid it if you know how to identify trend reversal signals. Knowing when a market is going to go up or down from it current state allows you to buy or sell accordingly; to take profits, or avoid losses. Doing this consistently and for the most part accurately, stacks up to greater performance.
What is a Contrarian?
A contrarian is someone who goes against a widespread opinion. For example, if the public believes that pineapple pizza is great but you disagree, then you are a contrarian.
In investment theory, a trader or investor who trades or invests contrary to the crowd or market is considered a contrarian. This strategy can yields great results and uncover evident flaws in the market.
Remember “Big Short”? In the movie, the main character discovers the upcoming real estate market crisis, but no one believes him until it was too late.
So, to be contrarian means finding the patterns in the market that signal change.
The change itself can be positive or negative. It doesn’t matter as long as the uncovered trend is a reversed one.
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When Should You Be Contrarian?
Just like any market, the crypto market goes in cycles. So you need to look for clues and try to identify the reverse pattern.
But how can you do it? Well, let’s say it’s been a bull market for a year. That means:
- the chances of it prolonging are getting slimmer
- there will come the point when the prices start to stagnate and then suddenly drop.
In such a long term scenario, the trend reversal is not really sudden, but given the highly volatile nature of the crypto market, prices reverse often. Every few days therefore, sometime less, opportunities present themselves.
Is It Hard to Be a Contrarian?
Well, it depends. Are you ready to spend hours analyzing the market, figuring out patterns, and predicting future trends? If your answer is yes, then i’s possible to learn.
But being contrarian also means having the discipline and to be ready to test the theories that might lead nowhere. Chances are that most theories won’t actually be true, and by the time you test them all, the trend reversal would have already happened. That’s why they need to be challenge with other analysis.
Look at the example of Ray Dalio, the founder of Bridgewater Associates, the world’s largest hedge fund. Dalio is a true risk manager who once made a bold move against the market. In 1982, he saw that American banks were lending too much money to Latin American countries that were $327 billion in debt. He assumed that this might be the prequel to the world’s financial crisis. In August, Mexico was already stating they couldn’t pay off $80 billion, out of which $20-30 billion.
That led to a domino effect in Latin America. Dalio bet everything he had on the collapse, but it didn’t happen. In fact, the US economy not only survived, but the market brought such massive gains that Dalio lost everything. So, being a contrarian could mean making big mistakes if you take the wrong bets with too much risk.
However, you don’t need to bet big or even spend hours analyzing graphs. Here at Libertify, our team leverages the contrarian theory for you, so you don’t need to worry about finding the time to do it, or getting it wrong. Here’s how it works.
Libertify Is Your Contrarian
Libertify has contrarian theory embedded in its solution. The Libertify app:
- Looks at trends in the market and identify signals of a trend reversal
- Assesses the situation, and gives a probability of a reversal or not
- In real time, using AI, Libertify applies this probability to your level of risk and challenges it with other indicators
- If a price reversal is identified, libertify builds and sends you a timely, personalized recommendation to buy or sell, or will automatically process the trade for you if you are using the autopilot mode.
If the probability of a negative trend reversal is high, then Libertify allocates more funds into a stable coins (your non-volatile cash reserve). However, if a positive trend reversal is on its way, the platform will reallocate what you have in stable coins back into the asset. This way you are consistently trading the volatility of the market and benefiting from the opportunities the reversals bring.
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