THE HAnDbook of TEcHnIcAl AnAlysIsemotional periods. Polls of expert and public opinions also give insight as to the
general sentiment of market participants.
Market participants and the Mechanics of Contrary Opinion
Market participants may be broadly divided into two groups, namely the:
- Well-informed
- Under-informed
The well-informed are usually the insiders, specialists, and various locals op-
erating at the exchange, while the under-informed are mostly represented by the
general public or crowd. It should be noted that to be well-informed requires the
participants to be contrarian in their outlook near market tops and bottoms, and
to never buck a strong trend. They usually buy at or near market tops and sell at
or near the market bottoms. Conversely, under‐informed participants tend to be
trend following instead. They tend to get into, and subsequently get out of, the
markets too late, and as a consequence are usually involved in climatic buying at
or near market tops and panic selling at or near market bottoms. See Figure 23.1.
Unfortunately not all insiders, specialists, locals, professional fund manag-
ers, and other industry experts are well-informed. In fact, many of them tend to
underperform the market and even sustain losses due to bad or inefficient market
timing. Similarly, not all members of the general public are under-informed.
It should be noted here that the term well-informed is not restricted to only
being privy to some form of exclusive inside information or special pre‐knowl-
edge of an impending event. To be well-informed requires the participant to be
contrarian near market tops and bottoms and to be a trend follower during a
strong trend. Hence, it does not really matter, for all practical purposes, whether
fIgure 23.1 Market Participants.