HFT Computers: Why Contrarian Works Every Time
The biggest banks/institutions and hedge funds look for every edge they can get in the stock market. They have billions of Dollars to spend and hundreds of billions to make if they create the fastest computer and the most intelligent trading programs. These high frequency computers continue to advance more and more and it is making it harder for the average investor to profit.
Have you noticed how more and more the market or stocks sell off on good news or rally on bad news? Have you noticed how when you go to bed the futures are up or down but then reverse by the next morning? This is called the contrarian play and it works almost every time. These computer programs are classic emotional analysts. They take the sentiment of the market (how many average investors are buying/selling). When they have enough of the little investor in on the trade (long or short) they slam the market in the opposite direction. The small investor panics and exits the position, giving their money to the massive banks as pure profit. This happens over and over again as these computer programs rinse and repeat.
How do you avoid this fate? How do you avoid giving profits to the institutions and going broke? Simply follow the charts. Always think opposite. When the markets are at highs or surging, think about shorting. When the markets are collapsing, think about buying. Use common sense and learn technical analysis (PPT Strategies). If something is overbought, never chase, if something is oversold, never short. Use strict discipline and it will keep you from being the sucker who is filling Wall Streets pockets with gold. Stop getting bullied by Wall Street. Learn the tricks and start profiting for life.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.