The Fascination with "Bear Markets" and "Calling Tops'

[destriero]

Looks like that thread has been closed, reason for that?

Trolls.

Treeman lost a bet and disappeared before paying. I hope he is OK!

 

[themickey]

Trolls.

Treeman lost a bet and disappeared before paying. I hope he is OK!

Hehe, anyway it was a good call you made on the opening post, I wished to follow the thread but couldn't.

 

[Specterx]

Just wondering where this excitement stems from. Only thing I can think of is a trader sees it as a way to see their equity go up while simple long investors suffer through?

1. Bear markets are rare and noteworthy events, thus correctly "calling the top" gives fund managers, analysts, commentators, ET posters etc. an ego and reputational boost, perhaps one with major business or professional consequences. (Think of the fund managers who made a killing in 2008 and saw AUM flood in, or the news articles you see about "so-and-so who predicted the GFC now says....").

2. Markets tend to fall more quickly and dramatically than they rise, thus offering the theoretical possibility of large profits in a short period of time from well-timed shorts.

3. Bear markets are exciting and filled with drama. Emotions are running high, fortunes are being made and lost, some businesses are struggling to survive while others are going under, speculative bubbles are imploding spectacularly, corporate frauds are being exposed with the associated legal and political drama, hair-on-fire commentators and politicians are all over the news predicting doom. And I think even hardened traders get a little of that "oh shit" feeling when you look at the screen and see ES down 5% or more.

4. The higher volatility and uncertainty associated with bear markets makes them more interesting to watch, and tends to increase profits (or profit opportunity at any rate) for short-term trading strategies.

If you ask me I'd say #1 and #3 are the main reasons.

 

[tomorton]

1. Bear markets are rare and noteworthy events, thus correctly "calling the top" gives fund managers, analysts, commentators, ET posters etc. an ego and reputational boost, perhaps one with major business or professional consequences. (Think of the fund managers who made a killing in 2008 and saw AUM flood in, or the news articles you see about "so-and-so who predicted the GFC now says....").

2. Markets tend to fall more quickly and dramatically than they rise, thus offering the theoretical possibility of large profits in a short period of time from well-timed shorts.

3. Bear markets are exciting and filled with drama. Emotions are running high, fortunes are being made and lost, some businesses are struggling to survive while others are going under, speculative bubbles are imploding spectacularly, corporate frauds are being exposed with the associated legal and political drama, hair-on-fire commentators and politicians are all over the news predicting doom. And I think even hardened traders get a little of that "oh shit" feeling when you look at the screen and see ES down 5% or more.

4. The higher volatility and uncertainty associated with bear markets makes them more interesting to watch, and tends to increase profits (or profit opportunity at any rate) for short-term trading strategies.

If you ask me I'd say #1 and #3 are the main reasons.

Fantastic analysis of the almost sexual attraction of calling tops.

 

[murray t turtle]

So you all guys saying bear markets provide more opportunities, but nobody seems to say that they are also much more difficult to trade. Taking advantage of volatility in a bull market is very different than bear market even for day traders. Not to mention day traders have less stocks to borrow and margins get increased. Swing trading is much harder, imho. ET Silverbacks(@Handle123?), please chime in with your experience?

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I warned before= bears can cost more in commissions;so i' ll just repeat those warnings.An advantage of a bear market, i can trade a benchmark like SDOW if i cant find any thing better LOL .But that benchmark lose$ money when DOW/DIA goes up-but that's life. Dont know if that's liquid enough for daytrading , about 95%+/ of mine is not short term trading.

Like William O Neil [IBD founder] says-never answer a margin call;EVEN WHEN they sell it, maybe @ worst price of the day??Increased margins are a good warning of risk; + if you ran an exchange you would increase those margins also.Not a prediction

 

[Pekelo]

Let's also mention that (unless you do it every other day) it takes guts to call a top in a raging bull market and even bigger guts to trade against it based on your bias/view. Timing is everything. You might be generally right but just a little bit early, and there goes your capital and trusting yourself.

Sometimes it is hard to believe that you are the only one seeing this correctly and everyone else is wrong, even if that is eventually the case.

 

[qlai]

it takes guts to call a top in a raging bull market and even bigger guts to trade against it based on your bias/view.

Guts or Stupidity? I don't know ... consensus in literature seems to be stupidity I guess it all boils down to implementation.

 

[Pekelo]

Guts or Stupidity? I don't know ... consensus in literature seems to be stupidity I guess it all boils down to implementation.

Well, all the HF managers in the Big short story were early, some of them by a year. Were they stupid or did they have guts to stick to their conviction? You tell me...