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The longer a given condition or trend persist and the more comfortable we get with it, the more dramatic the correction will be when the trend fails. This does not mean that you should try to catch tops or bottoms. Only fools believe that they can be consistently lucky in fading established trends. But when a trend ends, prices often overshoot in the opposite direction.

The crowd may be stupid, but they are stronger than you. Crowds have the power to create trends. Never fade a trend. If the trend is up, you should be long or on the sidelines. Never sell short, because “prices are too high” – never argue with the crowd. You don’t have to run with it – but you should never run against it.

The most expensive 4 words in the world are “This time is different”. The underlying reasons might be different, but the psychology behind all booms and busts is always the same.

“I’ve found over the years that much of what separates  the excellent traders form the average ones is not so much their ideas ,but what they do with those ideas. Two traders will have positions go their way and then pull back a bit. The first trader, anticipating punishment, fears losing his gain and takes a quick small profit. The second trader, anticipating reward, adds to the position on the pull back and reaps large gains. Same idea, different outcomes, all as result of conditioned patterns of thinking.”

Dr. Brett Steenbarger

“After studying forecasting day and night for 30 years, I realized that I don’t know what the market is going to do, and I’ve yet to find anyone who can consistently and reliably forecast an uncertain future” – Ned Davis

“My financial success stands in stark contrast with my ability to forecast events… all my forecasts are extremely tentative and subject to constant revision in the light of market developments” – George Soros

“The art of prophecy is difficult, especially with respect to the future” – Mark Twain