Contrarianism vs Trend Followers

The following illustrates the difference between contrarians and trend followers

There is a tremendous amount of overlap for Trend Followers and Contrarians. Contrarians should be long early about half the time and late about half the time. They might grab the bottom early 12.5% of a total cycle, and 12.5% of the time they are late, which translates to being early half the time and late half the time. The trend follower will always seek to be late on grabbing the bottom and early on the top. The trend follower wants to grab the middle 50-75% of the move, which means the 12.5-25% of the top and bottom will be missed.

Thus, they both will be exiting around the same timeframe. The difference is if the contrarian and trend follower both seek to be short, the trend follower will just sell and go to cash, and wait for the middle move downward to start considering a short, and the contrarian will seek to sell and then start going short in that same range.

Then at the bottom the contrarian and trend follower will both begin to cover, except that the contrarian will also start buying in the same range that the trend follower is merely covering and going to cash. The Contrarian will already be long and have it's entire position while the trend follower is merely positioning to grab the middle chunk of a move.

I think the Contrarian should be early with half of his buys (before the exact bottom) and late with the other half. No one can get the exact bottom every single time. Same thing with the sells. But of course that means they are mostly with the trend except for the bottom 10-20% and top 10-20%. On average though they get pretty close and can check themselves with their early+late percentage.

If you aren't occasionally early, you are waiting too long. If you aren't occasionally LATE, you probably aren't waiting long enough.

It's like the old poker adage "If you aren't getting caught bluffing, you aren't bluffing enough".

To modify the quote for contrarians, "If you aren't occasionally getting caught waiting too long to buy the bottom and sell the top, you aren't being patient enough and aggressive enough" Or conversely, "If you aren't occasionally getting caught LONG before the bottom, or in cash or short too early before the top... you aren't going to be able to hit the exact bottom enough and will also miss too many opportunities."

Exactly HOW CLOSE you get to the exact bottom or top is a matter of skill and liquidity.

However, I suspect it's slightly better to be early more often than late when it comes to selling high... and better late (or not at all), than early when it comes to buying (or covering shorts) low. Maybe 60% late on bottoms and 60% early on tops.

Parallel to this, a notable contrarian once said "The most successful contrarians are with the trend 80% of the time". That would mean they are grabbing the bottom 20% (half of it moving against them to the downside, and the other half to the upside again), and selling the top 20% (half of it moving against them to the upside and the other half to the downside again. That leaves them with the trend 80% of the time and against it 20% with the breakdown as follows:
10% of the time when it is going down, they are long.
10% of the time when it is going up, they are short or in cash.
80% of the time they are either long when the market is trending up or short/in cash when the market is trending down.