Who is on the other side of these trades?

AyeYo · Aug 24, 2009

So with all the world going long the equity markets - funds, banks, retail, and even the sheeple - and making the fortunes of their lives right now... who's on the other side of these trades?

For the first time in... ever?... the sheeple are the ones making a killing, rather than the ones getting killed. You can throw a dart the WSJ and make money in this market, and that's what everyone is doing (even people I know that don't have a clue but trading or investing). So I ask myself, who's losing, if not the sheeple?

Nattdog · Aug 24, 2009

Look at a chart covering 1995 to 2000 or 2003 to 2007 or go back further if you want. Bull markets are nothing new or unprecedented.

Stocks are not a derivative, there does not have to be a losing short on the other side.

SNBthetrue · Aug 24, 2009

every prey need to be attracted ( or pushed ) in the trap... no more time to wait for it to fall by luck ( or missfortune depending of the side.. )

NoDoji · Aug 24, 2009

Quote from AyeYo:

the sheeple are the ones making a killing, rather than the ones getting killed.

If by the term "sheeple" you mean "those who follow", of course they will generally be making the killing in any trend because they are following the trend, which is your friend until it ends.

AyeYo · Aug 24, 2009

Quote from NoDoji:

If by the term "sheeple" you mean "those who follow", of course they will generally be making the killing in any trend because they are following the trend, which is your friend until it ends.

There's a difference between sheeple and a trader that follows a trend. A trader gets in towards the start and knows when to call it quits. The sheeple are the Jonny-come-lately's that buy near the top and are left holding the bag.

I suppose the other posters are right though, there doesn't actually have to be a losing party as long as we're going up.

NoDoji · Aug 24, 2009

Quote from AyeYo:

The sheeple are the Jonny-come-lately's that buy near the top and are left holding the bag.

A trend follower wouldn't buy/sell the top/bottom. A trend follower would be adding to a profitable position by buying dips down to, or selling rallies up to the trend line/moving average, with stops in place where the trend would be violated.

So in a strong trend I would venture that a lot of those who buy the top of a trend are shorts throwing in the towel, and who sell the bottom of a trend are early bottom pickers, whose stops get hit.

But I'm sure there are few breakout traders in there who made it to the party too late.

FB123 · Aug 24, 2009

Quote from AyeYo:

For the first time in... ever?... the sheeple are the ones making a killing, rather than the ones getting killed.

Ever? You don't remember 1999? It wasn't that long ago.

And I doubt that the sheeple are making a killing, from what I'm hearing. Most of my clueless friends and family didn't pick the bottom in March.

AyeYo · Aug 25, 2009

Quote from FB123:

Ever? You don't remember 1999? It wasn't that long ago.

And I doubt that the sheeple are making a killing, from what I'm hearing. Most of my clueless friends and family didn't pick the bottom in March.

But that's just the point, you didn't have to pick the bottom in March. People are coming to this party at the 10th hour and still making plenty of money. My friend sold his FNM at $1.80 yesterday, who the hell bought that?

lexcorp · Aug 25, 2009

Quote from AyeYo:

For the first time in... ever?... the sheeple are the ones making a killing, rather than the ones getting killed. You can throw a dart the WSJ and make money in this market, and that's what everyone is doing (even people I know that don't have a clue but trading or investing). So I ask myself, who's losing, if not the sheeple?

Interesting. I thought the same thing.
I read various threads and people who sound like me (i.e amateurs) are saying 'get long here - markets are manipulated to keep going up' and lo-and-behold they keep getting it right lol.

Been reading these sorts of posts for a few months now!

Unfortunately ive been a little slow to cotton on, but am considering only going long on thr ES in the futures as i continue to learn about trading...

FB123 · Aug 25, 2009

Quote from AyeYo:

But that's just the point, you didn't have to pick the bottom in March. People are coming to this party at the 10th hour and still making plenty of money. My friend sold his FNM at $1.80 yesterday, who the hell bought that?

Most people have been getting in recently, and I don't think that they are going to be in a profit position for all that much longer. Just because your friend made a profit in one stock, it doesn't mean that the sheeple in general are all prospering in the same way. The people that are doing the best are actually the ones that never sold from the peak, since they have caught the entire rebound.

I had one friend tell me that he's going to wait until we get over DOW 10,000 "just to be sure" that we're in a bull market again before he starts to buy. Another friend of mine has been buying SDS on the way up (and losing his shirt) because "the market is overbought and going to go down soon". The sheeple are now thinking that they're going to be traders, it's quite amusing. Trust me, they won't be making money for very long... that's not how this game works.

In general, the dummies only make money when there is an overwhelming external force driving the market that lifts all boats. In 1999 that was a massive flow of funds into the market from all the last morons finally jumping in. Now it's the government. The government can't support this thing forever, and once there's a really bad piece of news that's actually real it will deal a death blow to this rally and start a new psychological movement downwards. When that happens they won't be able to do a damn thing to support it. Give it some more time.

In the meantime, expect to hear some more stories from your know-nothing friends about how they made money in this stock or that stock. That's how trading works - the morons sometimes make money... until they don't.