I spent over 35 years working my way to the top on Wall Street…
And I spent several decades running a hedge fund ranked in the top 1% by Barron’s.
I learned a lot during all that time… and made a lot of money… but now, I’m in the “giving back” phase of my life.
That’s why I left Wall Street to run The Opportunistic Trader advisory services for regular folks.
And it’s why I spend so much time trying to share my experience with readers like you… to help make you better traders.
So this week, I’ve been sharing my seven top rules for trading…
On Monday, I began with a couple of rules involving when you shouldn’t trade…
On Tuesday, I explained the importance of cutting your losses… and having a firm grasp on whatever it is you’re trading…
On Wednesday, I continued with two of my most critical principles… putting a “P” on the page and earning your risk…
And today, we’ll finish with my final rule…
Rule No. 7: The best trades are contrarian trades.
The popular trade is rarely the most rewarding one.
When the market is heading strongly in one direction, you must be willing to do the uncomfortable, sometimes illogical thing and trade in the other direction.
The herd mentality is dangerous. It’s what leads to bubbles… and crashes.
The people who get burned most in those trading environments are the ones who pile into the most popular trades.
That’s why my money management firm was able to make $95 million in the 2008-2009 financial meltdown – while countless other firms had to shut down.
We saw it coming and prepared accordingly. People thought we were nuts, of course.
The prevailing narrative was that stocks and real estate would stay strong well into the foreseeable future. And, of course, that’s far from what happened.
It’s how we succeeded again this year during the volatility and whipsaw moves the markets threw at us.
From the highs of late 2021 to the lows of this year, we’ve used this principle to profit in each of my trading services.
Ultimately, playing the contrarian trade is how you get those big, blowout, once-in-a-lifetime returns.
If you’re able to spot the holes in the prevailing investment narrative, you’ll be in position to counter the narrative… and make a killing while everyone else is getting killed.
And that’s a trading tactic that we’ll continue to use as we head into 2023, which promises to be another volatile stretch…
I hope you’ve enjoyed this series… and I’d love to hear your thoughts and questions on these seven rules of trading.
You can write in to [email protected].
And as always, thanks for being a reader.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict