Practically everyone who reads financial news has heard the old Wall Street proverb “the trend is your friend,” but few have been inquisitive enough to ask “what if the crowd is wrong?” The efficient market theory fails to take into account emotions, which for better and for worse, are a key driver of investing decisions. Because of this phenomenon, the market has a way of rudely surprising so-called experts when it moves against the sentiment of the majority, often causing more panic selling along the way [see 101 ETF Lessons Every Financial Advisor Should Learn]. The great Sir John Templeton further showcases the link between emotions and stock prices in his famous words that “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” So what’s the average self-directed investor to do? Contrarian indicators stand to offer valuable insights in times when every other research tool [...] Click here to read the original article on ETFdb.com. Related Posts: No Related Posts