Chartered Market Technician (CMT) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

In the context of contrarian opinion theory, a high degree of consensus among investors typically indicates that many market participants share a similar viewpoint or expectation regarding future market movements. When this happens, it often leads to an overextension in market psychology, which can set the stage for a trend reversal.

The rationale behind this is that when most investors are aligned in their beliefs—whether overly bullish or bearish—they might not leave room for differing opinions or counteractions. Consequently, market prices may become overvalued or undervalued due to this consensus. As a result, when new information or changes in sentiment occur, it can trigger a sudden and significant adjustment in price direction, reflecting the contrary beliefs of the minority who may have differing viewpoints.

This behavior supports the notion that when everyone is on one side of the market, the opposite movement is often more likely to follow, leading to a reversal in the prevailing trend.