OK. Sorry if this has been covered before. I did a glance through the psych threads, and couldn't find it. I'm curious, why do traders feel the compulsion/need to call market tops and bottoms. It seems we cant go a day in here without someone saying that "THIS HERE is the absolute high in US stocks", or "Crude is the buy of the century at these lows !!!" I'm more of the opinion that when a significant change of trend occurs, its going to be obvious enough that you're not going to have to guess and "feel" around for the top or the bottom. My guess is that people have a need to try and be the first one to see someone for whatever reason. Sort of a "I was the first one to see it coming !!!" type of thing. -T
Same reason you don't want to pay more than your neighbor did for their car or sell you house for less than top dollar. Unless you dollar cost average or something like that everybody is deciding where a stock is relative to the top and bottom to some extent. Nobody would buy stock if you thought it was not going higher, so in a sense you're saying "this is not the top," although you might not be saying "this is the bottom" when you buy. I like to trade when a stock has bounced off what appears to be the top or bottom, so I'm not exactly picking the top or bottom, but based on my observation of the chart deciding that the market has already determined that. Only problem is sometimes the market fakes you out and what you thought was a pull back ends up being a reversal.