How to Beat This Zero-Sum Game

Contrarian thinking is the only way to make money in the markets.

Sure, you can “follow” someone else’s trade tip every once in a while and do OK. But to consistently earn above-average profits from your investments you can’t think like the crowd.

The stock market is a zero sum game. That means that for every $100 made by one trader, $100 is lost by another trader. And this is why contrarian thinking is so profitable, when exercised wisely.

Just think about the alternate argument – that herd thinking is the best way to make money in the market. (I obviously don’t believe this, but let’s pretend just to make the point).

If this were true – that herd thinking is the best way to make money in the market – we’d soon run into a big “game over” problem. Here’s what I mean…

Let’s assume 10 people said “I’m buying the stock market.” Under the herd thinking model, that would prompt 10, or 20, other people to say “me too!” and join the 10 original buyers. Then, in a positive feedback loop, 100 more buyers would join the herd… and then another 100… and then another 1,000. You get the point… under this (fictional) model, every single market participant would be a buyer, eventually.

And that’s utterly impossible in a market that only executes transactions when there is 1) a buyer, 2) a seller, and 3) an agreed upon transaction price.

So a herd thinking model wouldn’t be sustainable for long. It’s clearly no way to make good profits from your investments.

Contrarian thinking isn’t easy (it’s not as simple as “just do the opposite” of the herd). And it won’t earn you any popularity points (which is why most people prefer to follow the herd, instead of sticking their necks out).

But contrarian thinking is still the best way to find great investments. That’s why we’re here. We’re contrarian thinkers who continually look for the flaws in popular “herd think,” then find the best ways to profit from these miscalculations.

We aren’t always the most popular guys at the table. But if we can deliver to you the best investment opportunities… that’s a fair trade to make, in my opinion.

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Categories: Markets

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.