Research suggests that about 70- to 90% of retail traders lose money (are wrong), so be careful with sentiment.
Contrary trading is a strategy for taking positions opposite the prevailing market sentiment/consensus.
When most traders are long (bullish), contrarians look for signs that the price might drop. Conversely, they anticipate a potential rally if the market is overly short (bearish).
For example, if 85% of traders are long on EUR/USD, a contrarian might look for resistance levels or weakening momentum to short the pair, expecting a pullback.
However, strong trends can continue despite extreme sentiment, leading to prolonged losses for contrarian positions.
Contrary trading works best when combined with solid technical and fundamental analysis. This ensures that you don’t just blindly bet against the crowd but also time your trades effectively.
