Trading against the trend may seem risky for some people. But in a way, it can also be quite profitable with the right timing and skills. In fact, contrarian trading is something that a number of traders also use to sometimes take advantage of a market that does not always work in a rational manner. Also known as counter-trend trading, contrarian trading is basically based on the fact that not all trends are always right.

Trading Against The Trend

Contrarian trading usually goes into the opposite direction of the trend. While most traders are recommending buying stocks, contrarian traders usually sell and vice versa. Most brokers usually think alike. But they are not usually right. They can also be prone to mistakes. It is in such cases that contrarian trading works best.

Contrarian Trading Method

In order to make use of contrarian trading more effectively, it is important to know the basics behind the strategy. Contrarian traders abide by the rule of always buying low and selling high, no matter what the trend may suggest. It is important for traders to identify a particular stock and spot its trend. Contrarian traders then try to identify the dips and peaks to spot the trend. Traders then try to buy on the dips and sell on the peaks. Contrarian trading does away with the effect of human emotion that usually affects and develops market trends. Instead, it tries to stick to a simple rule to buy low ans sell high no matter where the trend might be going.