For every turn in the market on a given timeframe, I think there are three groups of traders. First is the "smart money". My hypothesis is that this is the group which catches the turn BUT that membership in this group is volatile and there is enough churn in it that no member or group of members can always catch the turn. For proof, I would submit that no one can "corner the market", which someone who could catch EVERY turn would eventually do. For a while, membership can be glorious, but when a member loses the ability to catch the turns or tries to anticipate a turn too soon, it turns into a huge blowout. Members' equity curves are typically very jagged. Once a member begins to think it's smarter than the market, that's it. Since catching turns inevitably leads one to thinking one is smarter than the market, no member of this group can endure for very long. They end up on the covers of financial magazines one day and are yesterday's news the next. Second is the "smartest dumb money". My hypothesis is that this group never catches the turn (and probably doesn't try), but that their specialty is reading when the "smart money" has accomplished its goal of catching the turn. Some of the members of this group come from the "smart money" group, once they realized how volatile membership in that group actually is. Membership in this group is actually very stable because the "smart money" is actually quite easy to read, once they go into action. Instead of predicting a turn, this group reacts to the smart money's ability to make a turn "stick". My guess is that this is the group that actually has the smooth upward sloping equity curve everyone wants. Just from looking at the history of the trading business, my guess is that this group is the smallest and would include some of the long-lived, high-performing hedge funds and mutual funds. If true, the irony is that these firms go to all the trouble to hire the "best and the brightest" and then tells them "dumb it down so that you don't blow out like those other smart guys". Last is the "dumb money". My hypothesis is that they are the most numerous and that the first two groups distribute to them as they come in too late or they are the traders who try to catch the turn and be "smart money" and consistently fail. These are the traders who, at any given point, are in the midst of blowing out their accounts. Membership varies as new traders come in and some of these traders move into membership in the other two groups. This group's equity curve slopes down, down, down. There's a fourth group of "buy and hold" investors making regular contributions via 401(k) and IRA accounts, and other sorts of buyers and sellers like that, but they are not really traders nor do they really care about every market turn. Their regular contributions may actually come on a day which represents a turn, so they can find themselves in the "smart money" or "smartest dumb money" just by an accident of the calender. Unless they sell at a very inopportune time, they rarely end up as "dumb money". People who did this well for the decades of the 80s and 90s and had the luck to retire in the late 90s are the "millionaire next door" types. Lucky them! You might also include things like pension funds in here. They aren't trying to time the market, but they've got money to put to work. Anyway, this is just a model I use to think about traders and where they stand, who takes money from whom and what their "style" is. I'm curious to see if others think about this topic and where your thoughts differ from mine.