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In the Futures Trading market, there are always those who are eager to find a position to short when there is a rapid rise? And during a big dump, they rush in with long orders. What kind of mentality is this, and what kind of results are they hoping to achieve?
This is a very classic and common phenomenon that almost every trader experiences in the early stages of their career, and even many experienced traders occasionally make this mistake. The mindset and motivation behind this behavior are multi-layered, and we can delve into it from both psychological and trading strategy perspectives.
1. Core Mindset Analysis
This behavioral pattern is essentially a form of "counter-trend" behavior that goes against market trends, driven by several powerful human weaknesses and cognitive biases.
1. The "prophet" mentality and overconfidence
Psychological activity: "The price has risen so much, it must be at its peak, I am the one who discovered the bubble first and burst it." Or "It has fallen so deeply, it must be at the bottom, I am the smart one who bought at the bottom."
Essence: This is a manifestation of excessive confidence. Traders believe they are smarter than the market and can accurately predict the market's tops and bottoms, thus seizing a "perfect" trading opportunity.
2. Anchoring Effect
Psychological activity: During a rapid rise, their thinking is anchored to the previously lower price, feeling that "this price is too expensive now, unreasonable." During a big dump, the thinking is anchored to the previously higher price, feeling that "this price is too cheap now, it's a bargain."
Essentially: They are comparing with "past prices" rather than judging based on the current market momentum and trends.
3. Fear of Missing Out & Fear of Missing the Boat
Psychological Activity: During a big dump, watching the price fall all the way down, feeling extremely anxious inside: "If I don't enter a long order now, I won't be able to catch the rebound later, and I'll miss out on this wave of profit!"
Essence: This is not a rational decision based on analysis, but rather driven by the anxiety of "if I don't act now, it will be too late." When there is a sudden rise, part of the desire to short also comes from the fear of missing out on the "profits from the decline."
4. Revenge Trading and the "Break-even" Mentality
Psychological activity: If one was stopped out while shorting in an uptrend, or missed out on the opportunity due to shorting, it can lead to feelings of resentment and anger. "The market is wrong, I must prove I am right," or "The money I just lost must be immediately earned back with this 'correct' move."
Essence: This is a typical manifestation of emotional trading, where the purpose of trading is no longer to make a profit, but to satisfy emotional needs - to prove oneself and to take revenge on the market.
5. The illusion of seeking "cheap"
Psychological activity: Entering long orders during a big dump feels like "picking up bargains." They treat the trading targets as discounted items in a supermarket, believing that the price will eventually return to "original price."
Essence: Ignoring the trend power of "the strong get stronger, the weak get weaker." In financial markets, especially in leveraged Futures Trading, "cheap" can become cheaper, and "expensive" can become more expensive.
What kind of results do they want?
Their goals are very clear, but often they are just a mirage.
Capture the absolute peaks and troughs: Achieve a perfect trade akin to "one battle to become a god", gaining immense satisfaction and high profits.
Prove your judgment: Demonstrate to yourself (and possibly to others) that you possess market insight beyond the ordinary.
Quickly recover losses: Turn around previous losses in a short period of time.
What kind of results does reality usually give?
In most cases, this behavior will lead to:
Crushed by the trend: The market will not turn just because you think it's "expensive" or "cheap." After a rapid rise, there may be an even more rapid rise (short squeeze), and after a big dump, there may be an even deeper fall (killing long orders). Going against the trend is like trying to catch a falling knife with bare hands, which can easily lead to injury.
Frequent stop-loss: Even if your final directional judgment is correct, in the face of strong market momentum, your position is likely to be forcibly liquidated (liquidation or stop-loss) along the way because it cannot withstand floating losses during the continuation of the trend.
Huge psychological pressure: Holding a contra-position can cause immense psychological torment, as every minute of price fluctuations against you tortures your nerves, making it easy to lead to emotional breakdowns and more irrational decisions (such as continuously adding positions to average down costs, ultimately resulting in substantial losses).
What will professional traders do?
Mature traders understand that "going with the trend" is the first rule of survival and profit.
Respect the trend: They do not predict tops and bottoms, but rather wait for trend confirmation and look for opportunities to operate in the direction of the trend. For example, after a rapid rise, they do not rush to short, but instead wait for clear bearish signals (such as top formations, key resistance levels being hit, etc.) before considering entry.
Give up the fish head and fish tail: They understand that it is impossible and dangerous to eat the whole fish. They only earn the most stable and safest segment of profit in the middle of the trend, willingly giving up the opportunity to catch the top and bottom.
Strict discipline and risk management: They rely on systematic trading rather than emotions. Each position is accompanied by clear entry conditions, stop-loss positions, and take-profit targets.
In summary, shorting during a rapid rise and bottom-fishing during a big dump is an irrational behavior driven by human weaknesses (greed, fear, arrogance) that attempts to "outsmart the market." It pursues a low-probability perfect outcome while facing a high-probability risk of loss. In the arena of Futures Trading, which amplifies human weaknesses, recognizing the dangers of this mindset and striving to overcome it is an essential path to maturity and stable profitability.