Financial encyclopedia

What exactly is homeopathic trading and contrarian trading? Which is more profitable? Which is more risky? How to judge which one you are suitable for?

What is homeopathic trading?

Also known as right-hand trading, the trading strategy is the same as the market direction. The weak are always weak, the strong are always strong, buy high and sell higher!

Advantages of homeopathic trading:

It takes less time to enter the market gradually when there is a breakthrough signal, which can clearly grasp the general trend and reduce the transaction risk. When the trend disappears, it begins to exit, and it is easier to avoid the big crash. The capital turnover rate is relatively high.

Disadvantages of homeopathic trading:

Enter the market only because of a clear breakthrough, and enter the market only because of a clear breakthrough. You can only eat the middle in disguise. If the fluctuation in the middle is not big enough and the profit margin is less, some accumulated losses are quite large.

What is contrarian trading?

Also known as left-hand trading, investors presuppose that the current trend is about to reverse and try to profit from it, and establish a transaction that is opposite to the current market trend to buy low and sell high!

Advantages of contrarian trading:

Easy to buy at a relatively low point, the transaction cost is relatively low, and the profit margin is large. If you can bear the risk of fluctuation, the winning rate is generally higher.

Disadvantages of contrarian trading:

Personal subjective prediction is high. If the market falls, the bottom is an abyss and the time cost is high. This trading strategy is contrary to human nature. The more you fall, the more you invest, so you need to have considerable funds and strong psychological quality.

There is no standard answer to that question, but whether it suits you or not. People with higher risk tolerance can go in and out against the trend, while those with lower risk tolerance can choose to trade with the trend.