Why do contrarian bets lose?

Contrarian trading wins immediately, allows repeated wins

Because you win many times, capital increases, and in a market where increasing capital is the norm, you end up losing

Trend-following cannot win many times

Profits come all at once

Minimize losses and profits come all at once

to

and earning profits repeatedly leads to a market that will cause a big loss unless you decide for yourself

the result of increasing capital will differ

In the basic framework of the contrarian trade described later, the ability to determine when a market that can wipe you out actually exists is “nonexistent”

Because markets where you lose are often noisy,

if you keep cutting losses each time, losses will outweigh gains

However, selecting only markets that can wipe you out will cause losses to expand

and as a result, a large loss awaits no matter how you struggle

1. In noisy losing markets, many stop-outs lead to poor performance

2. To selectively pick only losing markets, you end up stopping out after large losses, resulting in massive losses

In contrast, trend-following yields the opposite results, which is why

profiting quickly makes capital increase more easily

the rise and fall of capital

the concepts of trend-following and contrarian trading are simply different

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