Contrary-Opinion Rules in Investing: Key Concepts and Strategies

Contrary-Opinion Rules in Investing

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Question

Contrary-opinion rules hold that

Answers

A. imitation of the trading patterns of astute investors will lead to superior returns.

B. technical analysis is false.

C. the majority of investors are wrong as the market approaches peaks and troughs.

D. it is always best to trade against the general market sentiment.

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Explanations

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A. B. C. D.

Contrary-opinion rules are technical trading rules that work on the assumption that the majority of investors are wrong as the market approaches peaks and troughs. Technical analysts try to determine when the majority of investors are either very bullish or bearish, and then trade in the opposite direction.

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