Act when very few other people are doing so. When a huge majority believes something, the market has a habit of doing the opposite. You may initially suffer a period of breaking even or perhaps some losses. However, you will increase the likelihood of doubling or tripling your rate of return compared with momentum traders when they choose to jump in during the buying frenzy. Basically they come into the market when the trend is established and their trading software is flashing the buy signal. By that time prices are no longer at compelling levels. The majority of the market participants wait for trend reversal confirmation before acting, instead of buying into severe weakness or selling into strong rallies.
It is emotionally very hard for an investor to keep buying into extended sell-offs. The longer an asset retreats, the more it feels like there must be something wrong with that asset or the market. However, you have to act in the opposite direction of your emotions rather than with them. Those who are able to eventually adapt to this strategy will achieve the greatest percentage of profit in the long run. The strongest rallies, whether intermediate or long-term, tend to begin from a position of greatest uncertainty.
Nobody has a crystal ball to brilliantly forecast the best time to trade. As professional traders at ETF Trade Advisor, we don’t worry about what might happen next week or the week after or even the next month, which must remain unknown and shouldn’t be relevant. For us, it is all about consistent gains when the odds are overwhelmingly in our favor, based on leading market indicators which are consistently overlooked by media and flock traders.