It's interesting. I have a firm belief that most people enter a trade planning to get stopped out. Most people blow up as a result of these Pirahna attacks; not by being swallowed by a Great White stop out. That's why I take profits all over the place. The sum of taking profits on small-medium gains is often going to amount to more than the total of any single move, which you probably won't catch anyway.
It is simple to understand what is going on here. Most particpants are little guys trading with the masses. When 80% of the particpants get on the same side of the trade then the trend stops from the shear weight of the particpants. It is the 20% on the other side with deep pockets that simply waits until everyone else is in on the other side. Once all are in it stops and begins to retrace faster and faster. LOL. Go to the ocean and watch the waves as they build up in height. Once they get tall enough they fall over because the tops are going faster then the bottom which is dragging the ocean floor. The ocean floor gets the best of them. John
You must explain: how do 80% get on the same side? For every sale (eg YM) there is an equal and opposite purchase and vice versa. Sellers equal buyers; vice versa. Only price can change. Isn't it wonderful? It really is no wonder irrationality and lossmaking go together for so many players or would-be players .. that is for so long as they can last at trading.
It's psychobabble like this that inflates the ego of traders, 90% of whom grossly underperform the buy & hold "sheep" who are always getting "f*cked" by the market. Look at the account runs at a major discount broker and you'll see who's really getting "f*cked."
The pros can shoot and miss and can average down a loser with big size to create a winner. The Public doesn't have that luxury. This results in them seeking absolute wins. I'm on the record as being a fan of pyramiding, but at what point does pyramiding become chasing? Herd psychology often results in the public believing that they are putting on a good risk/reward trade when, in reality, they are simply increasing their chances of getting stopped out quicker. When I speak of the public, I'm referring to the very large population of active yet undercapitalized, trite investors who research stocks via thier Scottrade, Etrade, Ameritrade, TD Waterhouse accounts... and to a considerable degree, even IB.
CM is shorthand for composite man or the key players behind each market move. The markets primary moves are initiated not by the sum total of all its parts/participants, but from velocity provided by a minority of discrete key players, those superiorly informed and well capitalized. As you suggested the masses then provide further fuel to the initiated moves. It must be nice to be able to visualize what the masses will do next, I have yet to arrive at that level in my own trading.