Why is the man on the other side laughing?

For every buyer there is a seller.

For every seller there has to be a buyer.

Both buyer as well as seller have to be there to complete any trade.

So why and when does the price fall or rise?

Well, the price rises when the buyers are desperate
and it falls when the sellers are desperate.

The volumes on the opposite side and intensity of desperation decide the rate of fall or rate of rise of the price.

But the point to be noted is why will anyone enter a stock when people are rushing to exit?

Or, why will anyone want to exit a stock when people are desperate to enter it?

When the buyers are desperate why don't the sellers see the reason behind the buyers' desperation and hence not sell?

When the sellers are desperate to get out of the stock, why don't the buyers see the reason behind dumping of the stock by the sellers and hence not buy?

Who is the fool on the other side of the trade?

Or, Is he not a fool and someone else is?

Very important questions with some very interesting answers.

The trader on the other side may still be interested to complete your trade for the following reasons:-

1) He may not know the reason behind your move.

2) He may be a long term investor, or a trader who has had enough profit by now.

3) He may be a "cool" trader who wants to profit from your panic reaction.

4) He may be trying to catch the "falling knife" with a belief that it has "fallen completely"!

5) There may be a ill-designed computer software on the other side

6) There may be an ill-decided stop loss on the other side.

7) There may be a big division of opinion among the trader universe about the interpretation of the current situation and hence being on opposite sides of the trade.

8) Trader fraternity may be using thousands and lacs of different tools,indicators and software each singing different songs?

Or is it that there are many a herds of sheeps behind each of the above reasons!

Whatever the reality, the fact is that we must be aware about the trader on the opposite side.

This will remind us to not to get carried away!

Afterall, we have the right to know why is the other man so happily catching what we are throwing!

When to be with the mob and when to leave it is a great sign of trading maturity.