Tuesday, October 06, 2009

Habitual Contrarian Traders: Being Right vs. Being Profitable

Certain traders I've observed seem to be habitual contrarians. If the market is screaming higher and looking like a trend day to the upside, they're looking for places to sell. If the market is slow and rangebound, they're hunting for the next breakout move.

Instead of identifying what the market *is* doing and following that, habitual contrarians try to anticipate the *next* move. Interestingly, that next move is generally something different than the market is presently doing.

Habitual contrarians are trading a need to be right: a need to make big market calls. They are engaging in trading to feed their ego, not build their account statements. It isn't enough to go for the high probability trade; they want to call the turn or break.

Many, many good trades are decidedly unsexy. They involve buying pullbacks in an uptrend or fading low volume moves to a range extreme. Successful traders subordinate ego; in their dance with markets, they don't need to lead.

Theirs is a situation in which unmet needs from outside of trading conspire to sabtotage trading. I will be writing more about this shortly.