Friday 23 October 2009

Leaning against that powerful tide

The crowd can be correct during much of a long trend, but always overstays and proves itself wrong at turning points.  When the feeling of bullish rightness becomes universal and powerful, a top is immediately at hand. 

Being successful in investing or trading means leaning against that powerful tide, which then creates psychological, financial and social stresses and strains not everyone can handle. 

If by nature an investor is passive, a follower, he may lack sufficient courage to do what is required for investing or trading success.  But if one can stick to contrarian principles despite probable early suboptimization of profits, he acquires a bucketful of cash near the top (plus some interest) for use later when the panic phase arrives. 

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