Contra Theory is a description of a trade or an investment that moves against the trend of the broader market or the sector in particular. When the economy is weak or stock market indexes underperform, contra theory outperforms, and vice versa.
It helps in identifying the best possible price in a Corrective / Weak Trend and gives extra leverage to the trader or an investor.
Contra Theory works best in two scenarios…
Technical analysis is the only tool that can help in analysing and finding the best contra bets.