Itching Lemmings or the Rules and Regulations of Fear and Greed

At the beginning of May we wrote about lemmings. Ten days ago we wrote about the seven year itch. This article ties the two together and is therefore about itching lemmings.

When Mr. Baron Rothschild was asked how he had managed to become so wealthy responded by saying; “I never buy at the bottom and I always sell too soon.”

This comment seems wrong. Surely we must expect one of the world’s richest men to buy at the bottom and sell at the top? What Mr. Rothschild was saying was not to become a slave to either of the two biggest emotional pitfalls a trader faces. Greed and Fear. Do not be greedy in trying to buy at the low and sell at the high and do not be fearful in both entering and exiting a position.

The only way that can be done is by opening a position once the trend has been established and exiting the position intentionally even though it may not be the top.

If we couple Mr. Rothschild’s investment philosophy with the 10 rules below, we have the makings of a successful trading business.


1. Markets mean revert always.
2. Excesses in one direction always lead to excess’ in the opposite direction before settling back at the mean.
3. It is never ’different this time’. Excess’ always mean revert.
4. Exponential moves always overshoot and never correct by moving sideways. They always mean revert.
5. Retail always buys the most at the top and sells the most at the bottom.
6. The emotions, fear and greed are stronger than the average trader and deeper than his pocket.
7. Risk assets are strongest when they are broad and weakest when they are limited to a few stocks.
8. Bear markets have three stages: a sharp down followed by a short term oversold rebound and then a long, painful fundamental downtrend.
9. When all the experts, forecasters, media commentators and investment bankers agree then something else is guaranteed to happen.
10. Bull markets are more fun than bear markets.
All the rules are important. Mr. Rothschild must have known them. His trading style adhered to Rules 1-4 completely. They also adhere to our seven year economic cycle story.
Rules 5-6 and 9 are the ones that retail traders break most frequently. Read our lemming article.
Rule 9 is particularly interesting. Until the beginning of last week everyone was bullish. In the blink of an eye this consensus has been turned upside down. An example of a current consensus view is that the FED will raise interest rates soon.
However ‘something else is going to happen’ does not necessarily mean that the opposite from the consensus view must happen. After all, the Fed can hardly lower short-term rates; they are at 0% already. The importance of Rule9 is that it asks the question ‘what if the Fed does not raise rates?’ In other words how much of a 25bp increase in interest rates have financial assets already priced in?
Rules 7 and 8 are generally completely forgotten by all.
Rule 10 speaks for itself. Mankind is ultimately optimistic.
All this may sound self-explanatory. However that cannot be the case, after all the majority of investors lose money.
Overcome this, read our research, follow our trading academy, buy our signal service and overcome your greed and fear.
Become a mini Mr. Baron Rothschild.
Do you find my macro pieces useful or interesting?  Why not connect with me on LinkedIn I’d love to hear your thoughts and welcome your feedback.


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About the Author
TFF aims to provide our customers with the best skills and knowledge to achieve their personal financial goals and level the playing field. The senior officials and staff of the TFF Team have more than 80 years experience in financial product trading, sales and fund management. For more information on TFF CLICK HERE.

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