The Psychological Stages of a Trend STAGE 1: Skepticism > Early meta shifts are met with extreme skepticism > The majority would rather bet on the more recent, strongly conditioned meta than adapt to the new information being presented. > A minority of early meta adopters set out to vocalize the shifting tides to the masses and are met with mixed reception. STAGE 2: The Momentum Crescendo > With time, the new meta (trend) will lead to a trickle-in effect of participation as they begin to acknowledge and get comfortable with the new information. > Many participants increase exposure to the trend as it accelerates and as their confidence in the trend grows. i.e small bets early and bigger bets later > A new feedback loop begins to form. This is when the conditioning effects of the new meta take place. > A trend will continue for a while even after the overwhelming majority of participants agree on the direction. > Contrarian traders begin to appear, i.e. "Everyone is bearish therefor I am bullish" note: fading confident sentiment works best in slowing momentum and poorly in strong momentum. STAGE 3: Divergence > Over time, conditioning effects will breed increasingly overconfident market participants willing to bet bigger and bigger on the current meta. > The momentum of the trend begins to wane and produce less intense results. > Late trends are met with a divergence between confidence and momentum. > Rising confidence; waning momentum > The decrescendo begins. Lessons: In risk markets it's wise to bet heaviest early in trend development when there is most skepticism. Maintain that position as other begin to flow in, then wane risk over time as the meta breeds a plethora of now overconfident betters. Fading sentiment works well when participants get seemingly get louder the more momentum slows. The divergence is actionable. The majority will be loudest and bet biggest after they become certain; a lethal game. "It's what you know that kills you"