The wild swings in today's markets have so many investors worried about where to
invest their money... and rightfully so. The old "buy and hold" strategies of
the past just simply don't work anymore. The violent shifts in asset classes
that we've experienced lately have the ability to wipe out any portfolio in a
heartbeat if you happen to be on the wrong side of the trade. The fact is there
are no safe asset classes like it anymore.
There was a time that investing in the likes of General Motors, the now
government owned AIG or Citigroup would have been a very safe place to put
you're money over the long haul with their rising share prices and reliable
dividends. You might recall the saying, "what's good for GM is good for the
country." If this reasoning still held true, it would imply that the the U.S. is
headed toward bankruptcy also. I am of the personal belief that if we remain on
the present trajectory that the Federal Government's bankruptcy and the demise
of the dollar as the "world's reserve currency" is a very real possibility.
It is for this very reason that more and more investors are no longer handing
their money over to so called Wall Street Professionals to manage their wealth,
but are taking responsibility for their own investment decisions. Without
question, it is highly unlikely that anyone will manage (or care about) your
money better than you. It is for this reason that I would like to share with you
an investment secret used by professionals to identify assets that have the
ability to skyrocket in value and to get there before everyone else does.
There are dozens of brokerage firms in the US and choosing the best one is not easy. Some companies are simple terrible, so
make sure to read reviews before you sign up:
Sogotrade Review,
Just2trade Review,
Wellstrade Review.
When it comes to pulling large sums of money out of the stock market no other
investment style is more powerful than contrarian investing. To become a
successful contrarian investor you must find market "extremes." Extremes occur
when the majority of traders place their bets on an obvious outcome, whether it
be an individual stock, commodity, ETF or market index. When this happens the
trade becomes what is known as "crowded" or "one sided." When traders become
overly optimistic or overly pessimistic about an asset it creates an
"overbought" or "oversold" condition causing it to stretch the asset price in
one direction with no one on the other side of the trade. With out additional
capital going into an asset, it's price is stretched past the limit and snaps
back sharply in the opposite direction.
An example of this would be the massive run up of crude oil in the summer on
2008 which took the price per barrel from $45 to $147. It was at that very point
that Goldman Sachs analysts stated the price of crude would reach $200 in the
next six months. This obviously signaled the top for crude oil prices which
proceeded to collapse down to $40 a barrel. The next phase drove the price down
to $30 and everyone was touting the deflationary pressures and oversupply and
that crude oil prices would soon go to $20 per barrel. This again, signaled the
bottom and prices snapped back to the $70 range where they sit today. This is a
prime example of trading extremes and how contrarian investing works. Buying put
options on USO (the crude oil ETF on the NYSE) at $147 would have produced a
windfall profit for the contrarian investor while buying a call option on the
same ETF (USO) at $30 would have also produced a substantial profit for the
investor.
This is simply one instance but the same story is repeated day in and day out in
the markets. Find an asset that is trading at an extreme in sentiment, valuation
and price and trade against the crowd. Trade small until you become comfortable
with the strategy and you too can focus on becoming an extreme (contrarian)
trader. It is the easiest strategy for making fast profits with all your trades.