why does price tend to fall faster than it rises?

Quote from SteveNYC:

Isn't shorting harder and riskier in a bull/bullish market?
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Only to those who are not real Bears. 95% of my trades are on the sell side. I am 100% short this year and over 180% return on my yearly fixed capital. Been a short seller for over 15years, I created my own style, strategy and system with of course some help with a good friend. Never had less than 120% ROI in the last 8years. It takes Skill, pracitse and most importantly patience. How many trades did I make the last 2 months? 3 How much did I make $1.35m - kiss my ass bull traders:D
 
Quote from KDASFTG:

Greetings,

The answer my mentor gave to me for this very same question was:

"Fear is a much stronger emotion than Greed".

Hope this helps.
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Wise mentor.

Crazy A
 
Quote from KDASFTG:

"Fear is a much stronger emotion than Greed".
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Exactly.

Market Psych 101. Evolutionarily speaking, greed gets tamed. Fear gets rewarded. If Caveman Og fears something he thinks he saw moving in the bushes, then there is not much of a price if he's wrong. If he is complacent about the Sabertooth creeping up on him, there's a huge penalty for being wrong.

Go to a crowd of people and test whether they'd rather avoid a $1000 loss or make a $1000 gain. Most will choose the former.

It'd be interesting to raise the latter amount to see where the results even out. I bet most people would rather avoid a $1000 loss than make a $10k gain!
 
Quote from KDASFTG:

Greetings,

The answer my mentor gave to me for this very same question was:

"Fear is a much stronger emotion than Greed".

Hope this helps.
More...

The answer is false (not the quote, but the answer which relates it to the quote is false).

Your mentor needs a mentor.

I am shocked at how many people think the answer is correct (probably because the quote is correct).
 
Quote from 1a2b3cppp:

This seems to be the trend on daily charts.

Put another reason, red bars tend to be bigger than green bars.

Any reason? Panic and emotion?
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In "up trends" the price goes up faster and easier, in "down trends" it goes down faster and easier, in "lateral trends" it is about the same. This is because each trend has dominant moves (in the trend direction) and retraces (opposite trend direction, or lateral). So, if you see bigger red bars, accompanied by larger volume, you're in down trend, or there's a down trend creeping out.
 
Price moves faster in the direction of fear.

For stocks, this means price generally falls faster than it rises. And Volume, which is coincident to price movement, will tend to be larger for down moves than up moves.

For physical commodities, fear generally means a supply shortage is anticipated and price moves up sharply. Same fear-based principle causing large moves, but price moves in the opposite direction as stocks.

Of course, there are exceptions to everything so don't rely on this general tendency as gospel.
 
Quote from tradingjournals:

The answer is false (not the quote, but the answer which relates it to the quote is false).

Your mentor needs a mentor.

I am shocked at how many people think the answer is correct (probably because the quote is correct).
More...

Then what is the correct answer? It is not an obvious answer to me.
 
Greetings,

To Mr. Tradingjournals, why is it that you could not make a civil comment without getting personal. My mentor was an honorable man and a person of genuine integrity. I take personal exception to your unwarranted attack on him. I find your lack of civility disturbing.

Sir, you have earned a spot on my "ignore list". In future, if you cannot find anything truly useful or constructive to add to the discussion,....then try silence.

KDASFTG
 
Quote from Trader13:

Price moves faster in the direction of fear.

For stocks, this means price generally falls faster than it rises. And Volume, which is coincident to price movement, will tend to be larger for down moves than up moves.

For physical commodities, fear generally means a supply shortage is anticipated and price moves up sharply. Same fear-based principle causing large moves, but price moves in the opposite direction as stocks.

Of course, there are exceptions to everything so don't rely on this general tendency as gospel.
More...

This is the right one. Look at the IVs of calls and puts on, say, GLD vs SPY. GLD's skew is much flatter because of what this person is pointing out.
 
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