The market isn't always efficient, the market prices are constantly wrong. We overwhelmed by uncertainty and misconception. The realness is that, we will never have all the complete information. 

Retail investors were burned badly in 2000 and 2008. Buy and hold, blew in in their faces. I don't know whether the bitter memories in the previous crashes traumatized the little guys sat on the stock market rise till that crashes. I knew that, regret wrecks people's finances like no other emotion.

But now small investors are piling in again. And they are investing like it's 1999. More and more money pours into the stock market. Even more than in 2000.

The stock market is one giant roller coaster of "regret " for retail investors. Regret for not getting in....regret for getting in too late....regret for being left holding the bag.

Your regret of is accompanied by feelings that one should have known better. By thoughts about the mistakes one has made and the opportunity lost, by a tendency to kick oneself and to correct one's mistake and by wanting to undo the event and to get a second chance. 

As investors pile into the high flying stocks, they receive a dopamine rush to their brains similar to a drug addict when getting high. The sensation comes in anticipating of greater returns. Getting what we expect doesn't provide a dopamine rush, only unexpected gains do.

The same way an addict needs  additional doses, market's investors crave more risk. Now, as the high flying stocks continues to surge ahead, all bad memories have faded away and retail investors are chasing higher highs, literally.

When the investment crash, the pain of regret will be that much greater. The question is ; Are investors about to plunge into another deep valley of regret?

If we believe we can earn excess by understanding the cyclical nature of markets and their reflexive response to participant's collective action, perhaps we can exploit those opportunities more effectively rather than exploit by them. 

Most investors accept the market is always right, but in the sense that they present a biased view of the future, " the market prices are always wrong." The market never reflects.underlying reality accurately. Financial markets always distort in some way or another and the distortions finds expression in the market prices. This distortion can, occasionally find ways to affect the fundamentals that market prices supposed to reflect. 

Stock market bubble doesn't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception. Every bubble consists of a trend that can be observed in the real world and a misconception relating to that trend. The two elements interact with each other in a reflexive manner.

Money values do not simply the state of affairs in the real world. Valuation is a positive act that makes an impact on the course of events. Monetary and new phenomena are connected in a reflexive fashion. That is, they influence each other mutually. In other words, monetarism is a false ideology. 

Whenever there's a conflict between universal principles and self interest, self interest is likely to prevail. When interest rates are low, we have conditions for asset bubbles to develop. Then, yet again, what are the masses doing at the peak? 

The financial markets generally are unpredictable. So one has to have different scenarios, the idea that you can actually predict what is going to happen contradicts my way of looking at the market. One has to make decisions even though one knows he may be wrong. No one can avoid being wrong, but being aware of the uncertainties, we're more likely to correct our mistakes than the traditional investors.

Once we realize that imperfect understanding is the human condition, there is no shame in being wrong , only in failing to correct our mistakes. Making mistakes as an investor/trader is inevitable, but failing to correct the mistake is inexcusable and can, in the worst circumstances, be cataclysmic to our wealth. 

We will be wealthier, if we know when we're wrong and survived by recognizing our mistakes. Whenever we're wrong, we have to fight or take flight. Being wrong means we're losing. Losing means we are eroding the power of compounding. Clearly we can't stay in pain for long. We can't stay compound at 20% for the next 20 years if we don't recognize our mistakes and take swift and decisive action to correct our errors. 

We hope to catch new trends early and in later stages, we try to catch trend reversals. Therefore, we tend to stabilize rather than destabilize the market. We are not this as a public service. It's a style of making money. Where things are good and comfortable, will consistently yield mediocre returns, not bad returns, just not good returns. If you make an investment, and you feel OK, you will make OK returns. If you feels good, you'll likely lose. If you felt a little queasy, you'll likely make money.

What this thoughts seem to say quite loudly is that in a increasingly complex investment world means greater risk of errors and higher costs for those errors. So the challenging thing to determine is what level of risk is appropriate for investors to take. 

Risk management and mitigation are paramount, that the ability to admit we are wrong and exit with a small loss is crucial, in order to structure positions more effectively to capitalize on investment trends and take advantage of market dislocations.

It can help us enjoying the vicious and less time being punished by the vicious. 

Enjoy the trade.