DEFINITION of 'Contrarian'

An investment style that goes against prevailing market trends by buying assets that are performing poorly and then selling when they perform well.


Loading the player...

BREAKING DOWN 'Contrarian'

A contrarian investor believes that the people who say the market is going up do so only when they are fully invested and have no further purchasing power. At this point, the market is at a peak. On the other hand, when people predict a downturn, they have already sold out, at which point the market can only go up.

Contrarian investing also emphasizes out-of-favor securities with low P/E ratios.

For more on indicators that contrarians monitor, check out Why is the disparity index indicator important to contrarian investors?

  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  2. Benjamin Method

    The investment approach that aims to follow the strategies implemented ...
  3. Contra Market

    A move against the direction or trend of the broad market. Contra ...
  4. Investment Philosophy

    A set of guiding principles that inform and shape an individual's ...
  5. Sir John Templeton

    An investor considered by many to be one of the greatest investors ...
  6. Countermove

    The movement of a security's price against the current trend. ...
Related Articles
  1. Mutual Funds & ETFs

    3 Strategies for Trading Mutual Funds

    Learn some of the most commonly used investment strategies employed by mutual fund managers or that can be employed by individual mutual fund investors.
  2. Economics

    3 Ways To Tell If Your Stock Has Bottomed

    No one can call stock bottoms with absolute certainty, but there are some common trends that appear when stocks are about to hit bottom.
  3. Trading Strategies

    Can Perpetual Contrarians Profit As Traders?

    Succeeding as a contrarian is all about knowing when to act on your opinion about the next turn in the market.
  4. Active Trading

    Investing Lessons From Across The Pond

    There's a lot to learn from Anthony Bolton, who is known as Europe's Peter Lynch.
  5. Active Trading

    Buy When There's Blood In The Streets

    Contrarian investors find value in the worst market conditions. Find out how they do it.
  6. Investing

    Finding Profit In Troubled Stocks

    Find out the difference between a company capable of surviving a share-price beating and one that cannot.
  7. Options & Futures

    Gauging Major Turns With Psychology

    Knowing what the market is thinking is the best way to determine what it will do next.
  8. Investing Basics

    3 Key Signs Of A Market Top

    When stocks rise or fall, the financial fate of investors change, as well. There are certain signs that can reveal a stock’s course, and investors don’t need to be experts to spot them.
  9. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  10. Investing News

    6 Signs You Are Addicted To Investing

    An addiction to trading can ruin your life and relationships. Not to mention the monetary costs. There are telltale signs that you've gone too far.
  1. Why is the disparity index indicator important to contrarian investors?

    The disparity index is a technical momentum indicator that compares market price to a time-defined moving average of market ... Read Full Answer >>
  2. What are common trading strategies used with the disparity index?

    Technical analysts and traders use the disparity index to spot abnormal or rapid movements in a security's price, showing ... Read Full Answer >>
  3. How do I use the disparity index in forex trading?

    The disparity index is a technical volatility oscillator that evaluates the relationship between current price action and ... Read Full Answer >>
  4. What is the disparity index formula and how is it calculated?

    Steve Nison introduced the disparity index in his book, "Beyond Candlesticks," as a way to analyze price movements in candlestick ... Read Full Answer >>
  5. How do mutual funds split?

    Mutual funds split in the same way that individual stocks split, but less often. Like a stock split, mutual fund splits do ... Read Full Answer >>
  6. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!