The Application and Scope of Contrary Theory

  • 2025-07-15

1. When analyzing the stock market, Contrary Theory has a relatively focused, or even narrow, scope. It primarily studies the overall trend of the stock market as a whole and does not analyze individual industries or specific stocks.  

 

2. Contrary Theory typically analyzes a dynamic situation: given the current state of the stock market—if it is rising—will it continue to rise, or has it peaked and is about to decline? If the market is currently falling, will it continue to drop, or has it bottomed out and is about to rebound?  

 

3. Contrary Theory specializes in studying whether a rising or falling market is about to enter a so-called "turning point." This refers to whether a major adjustment will follow a significant rise, even transitioning from a bull market to a bear market, or whether a major rebound will occur after a steep decline, potentially shifting from a bear market to a bull market. Predicting such turning points is the forte of Contrary Theory.  

 

4. The core idea of Contrary Theory is to analyze whether the stock market will continue rising or falling, whether it has peaked or bottomed out, and whether a turning point is imminent. These are the key focuses of Contrary Theory's analysis.  

 

5. It can be said that Contrary Theory is an analysis of the overall trend of the stock market, examining the direction of the market as a whole. The general trend of the stock market affects every investor. However, the overall market trend is a dynamic analysis that changes daily and never remains static. Therefore, the key points of Contrary Theory's analysis are constantly evolving.  

 

6. Contrary Theory is primarily focused on medium- to long-term stock investment analysis. It is most insightful when applied to scenarios where a major bull market is about to end and transition into a bear market, or when a major bear market is nearing its end and is about to turn into a bull market. However, these market analyses still emphasize medium- to long-term changes in the overall stock market. Short-term trading is beyond the scope of Contrary Theory.

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