In the book "The Trading Game" by Gary Stevenson, he makes an interesting point about making money when others are wrong. I noticed this when I see the market move when the economic data shows within the expected range of forecasts prior. The truth that I've noticed in the markets is that price movements are traded by expectations for next pending announcement more than the current pending announcement.
So when they said you make money when others are wrong, the pre event to this is betting first before the rest know what's up. That's why there's this buzz about the contrarian mindset where people should sell when others get greedy and buy when there's a lot of fear and uncertainty. It's not really applicable for people who have no deep pockets but it makes sense.
The markets can remain irrational longer than you remain solvent
While you can be right about the token you're betting on is oversold or undervalued, you'd still need others to help fuel that conviction and it translates to a rally on the chart. Let's say Hive is better than the meme tokens on Solana that have no utility and only fueled by degeneracy. You expect that it's fundamentally true and eventually those meme tokens can lose value, so you bet on Hive. But those meme tokens and the people betting on them are irrational with deep pockets than the people believing in Hive. You stuck with your conviction and you lose money in opportunity costs or realized money as Hive devalues.
I think there's more need for emphasis to betting in first than the rest of the crowd because before a major dump with some amount of luck in timing it. I've been reviewing the latest pumps that happened on Hive recently and most of backtest done in hindsight 20/20 were just YOLO the order to buy before the time hits UTC +8:00 at 8am Philippine, if it doesn't pump, then expect a dump or nothing happens. Then be the first to dump before the rest of the late comers do it and then you make money. The same way for dumps, do the opposite.
The economy is on fever therefore it needs to cool down, a correction is needed so you short but it rallies up even higher without any reasonable fundamental catalyst, but that's just the market being irrational. I've seen this happen with PH stocks when companies are doing well and even when there is no apparent reason for it to be devalued, it just trends down and vice versa.
You still have to hope that some larger pockets follow along the same way of thinking to make it reflected on the chart as a reward for being contrarian.
In a way, you still make money when others are wrong but this time, it only happens if you bet stuff first before anyone else does.
So how did this affect my trading psychology? I used to be more reactive > than proactive but now I'm considering to change some of my mental algorithms on when to buy and sell after these reflections. I doubt that translate to more money instantly but it would lead to fewer regrets in the long run.
Thanks for your time.
Good evening my brothers and best wishes for today.
@adamada, I paid out 0.784 HIVE and 0.294 HBD to reward 1 comments in this discussion thread.