A Losing Thesis (Part 1)

At the end of last week, someone posted the following in a trading forum I follow:

> Where r all the SMART traders when the market is going down ???

I have also realized this on multiple occasions: on-line forums tend to get very quiet when the market moves lower.

I believe the participants are either in pain from losing money or not trading and therefore have nothing to contribute.

If they are not trading then I would guess they are not making consistent money overall. The market goes up and down and I have to trade in both environments. Only in Fantasyland would I ever be able to choose just one because I would always make money. My guess is traders like this are losing money overall because finding the perfect trading system is very, very difficult. If these traders are net positive then they are probably not making a whole lot.

If these traders are losing money then hopefully they haven’t been trading too large and are soon (or already have) to be knocked out of the game altogether.

I think part of the market cycle is that people win for extended periods and get “fooled by randomness:” we think we have great skill, we become overconfident, and we ratchet up our position size. When the market eventually acts nasty as it periodically does, we get beaten down hard. The losses are such a blow to our egos that we walk quietly into the night never to speak of it again.

This is my explanation for why I hear so many people talking about winning trades but very few talking about losing ones.

I’m categorizing this under Wisdom but please take it with a grain of salt. I don’t think any definitive answers are knowable here. This is my thesis based on psychology teachings and my subjective history of observations over the years.