Go Visaria! Another sucker rides the shark!
http://www.elitetrader.com/vb/showthread.php?threadid=278914&perpage=6&pagenumber=8
Why Do People Buy At A Top?
- Thread starter tradingjournals
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Go Visaria! Another sucker rides the shark!
http://www.elitetrader.com/vb/showthread.php?threadid=278914&perpage=6&pagenumber=8
Because they think it's going higher, doh.
The real question is why they think it's going higher. It's because they assume that recent price action indicates future price action will be similar - they for some reason expect that because (for example) gold has gone up 10 years in a row, it will keep going up.
Why do they assume this? In many fields of life it's a workable guide. The sun rises each morning, we assume it will keep doing so. You cross an intersection on a green light, and every time so far, it's been safe. You go round a blind bend at 60mph and haven't yet encountered a parked tractor, or a car overtaking on the wrong side of the road - so you assume it'll work this time also. You go to work each day and keep your job, you assume you will keep it the next day, or 100 days, or 1000 days. You wake up married each day for 10 years and assume you will be married the next year or 10 or 30 years.
Only practitioners in fields where rare risks are critical, and are encountered often enough to be detected and have an impact, tend to be aware of these things. For example: pilots, motorcyclists, professional speculators, generals with extensive combat experience, nuclear power plant design engineers etc. A good experienced motorcyclist is thinking, literally every few seconds of every ride on the road, that every other vehicle will *try to murder him* in the next few seconds; that EVERY blind bend has a car or truck overtaking on the wrong side of the road; that a huge pothole will appear from underneath the back of the vehicle he is following; that every vehicle ahead will immediately perform an emergency stop for no reason; that every vehicle waiting at a junction will turn across his path at the last second. Similarly, a good trader assumes that every market he is long in, could start a huge crash within the next few minutes/hours/days, and prepares for how to react to that (avoiding excessive size, using stop-losses, hedging with out-the-money options etc); he assumes every trade could be a loser, and therefore sizes accordingly and makes a thorough risk control plan and follows it 100% without hesitation; he assumes every setup could be a tricky fakeout before going the other way.
Most people can go their whole lives without encountering situations where critical risks are common. So, most people suck at it. They never had to reexamine their naive, stone-age era caveman survival epistemology. That's why they buy at tops.
One thing I am certain about is that your theory/assumption
shown above is false as an answer to why people buy tops.
Only practitioners in fields where rare risks are critical, [/QUOTE]
Why is trading not on your list?
This is good input. I had the mandatory buys. I think I need to add a no-brainer buyers/slam dunkers (people who know and are mainly in search of liquidity).
Here are examples of things I find not explainable. Now it is around 3Pm, QQQ at 82.48. Why would anyone buy at this price today?