This Is The Top ?

[Caseynotes]

I love this game, anyone can play and IG clients are always at it. During multi-year bull runs you will find the majority of IG clients are trying to short the market, usually between 60 and 70% at any given time, brilliant.

I often wonder what makes it psychologically so enticing to keep trying to pick tops? I personally think it's because people look at the chart and see price is at the top of the screen ergo it must be about to turn round and come down right?

I also wonder if the reverse is true, that in a bear market do IG clients keep trying to pick the bottom and buy? Bear markets come round so infrequently I've not had a chance to check.

The two charts side by side below, are either of these the 'top'? who knows, realistically the 'top' can only be determined with hindsight, 'keeping your power dry' through multi-year bull runs waiting for the big crash just doesn't make any sense, play the chart in front of you not the one you hope to see in the future. The charts below are weekly, the S+P can take months to roll over so why would you be trying to pick the day, what's the point in being wrong hundreds of times in order to be right one day, but as the bottom chart shows there are always plenty takers.

 

[dmedin]

How do you trade indices? 

From what you say I gather that it's better to get long and stay long.  So why not just buy real stocks in an ETF or index fund that tracks the S&P 500?

Edited August 14, 2019 by dmedin

[Caseynotes]

19 minutes ago, dmedin said:

How do you trade indices? 

From what you say I gather that it's better to get long and stay long.  So why not just buy real stocks in an ETF or index fund that tracks the S&P 500?

'get long stay long' not at all, I'm questioning the fixation people have on calling tops and jumping in short at the drop of a hat. It's a psychological trap that afflicts the majority and is without doubt the main reason most people fail.

[dmedin]

5 hours ago, Caseynotes said:

'get long stay long' not at all, I'm questioning the fixation people have on calling tops and jumping in short at the drop of a hat. It's a psychological trap that afflicts the majority and is without doubt the main reason most people fail.

 

The prospect of buying back all those shares on the cheap must be delicious.

[Caseynotes]

14 hours ago, dmedin said:

 

The prospect of buying back all those shares on the cheap must be delicious.

Yaay