Why Do People Buy At A Top?

Look at the chart of SPY. The market goes up, the market goes down. Go short here and you're bound to make money regardless of how high we go over the next few days of earnings reports.
 
People don't knowingly buy at the top. They get excited to see a rising market and fear being left behind. These are also the people who have been too conservative with their approach and when everyone around them has made money and is talking about it constantly, they can't take it any more and jump in.

Some very able traders also buy at the top. The difference is that the able trader exis when the price refuses to go up, while the average Joe would stay in, in hopes of price to go up again.

Another thing to note is that a top is identifiable only in hindsight. In real time it's just price moving up. It's the stoppage of that upward move and a reversal that creates the top. The price is unable to get back to the previous high and heads lower over time.

Gringo
 
Quote from mastacoli71:

psychological like everything else in the market. those that make money doing it are probably breakout traders that have a system when to take profits.

trading is not about taking a shot or throwing darts.
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don't underestimate the efficacy of dart throwing methodologies when it comes to trading.
 
Quote from Hansel H:

Look at the chart of SPY. The market goes up, the market goes down. Go short here and you're bound to make money regardless of how high we go over the next few days of earnings reports.
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So short here and if it goes up another 50 points, you'll make money? :confused:
 
Too many indicators that we're already overbought here. 50 points would really defy probability. Possible of course given that we now live in such interesting times.
 
It is 2:12P now. SPY at 175.50. This is an example where I look at the price, and I do not understand why anyone would buy at this price (if it were discretionary buying). From my perspective (and I could be wrong) I see it more likely to visit 175.25 and below (before it would go higher if it were to go higher (which I doubt)).

PS: 12 minutes later it has fallen. So what happened? Was there any news? Are there big sellers in this forum?
 
Quote from tradingjournals:

It is 2:12P now. SPY at 175.50. This is an example where I look at the price, and I do not understand why anyone would buy at this price (if it were discretionary buying).
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The reason there's a buyer at a given price is that the buyer believes price is going higher, and believes the current price (or current price zone in the case of large traders) is a good value, whether it's initiating/adding to a long or covering/scaling out of a short.
 
Quote from zdreg:

don't underestimate the efficacy of dart throwing methodologies when it comes to trading.
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Show me evidence of a long term successful trader / investor whose strategy is simply based on throwing darts without any take profit or stop loss rules. You'll be hard pressed to find a single one. Psychology trumps most in the markets.
 
Quote from tradingjournals:

If you understand why people buy at a top, could you share it?
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Since I have serious reservations one trader cares a tidily why another trader does what they do

I dare say this a passive / aggressive way of addressing one’s deficiencies

If I am wrong - I apologies TJ

But why wonder about another if it doesn't apply

==========================

That said;

No sensible trader “buys a top"…,

Many traders will hold a failed continuation / failed breakout – far too long

As to why one does that – consult a mirror (and use a stop for Christ sakes)

RN
 
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