Financial market news often describe investors as “bargain hunting” or “profit taking”, depending on the day’s trading direction. These are oversimplistic euphemisms that could mislead neophyte investors.
People are not so lucky that the only trading activities that go on are “bargain hunting” and “profit taking”. In the real world, investors incur many losing trades. If someone sold at market top, then someone also bought there. Likewise for market bottoms.
By reporting from a mainly bullish perspective, financial market newscasters fail to offer balance. Why describe only the bargain hunters at the bottom of markets when there are also all those who mistakenly cut their losses at that point? Why conveniently forget all those euphorically buying at the market peak?
Furthermore, buying and selling constitutes perhaps 1% of medium and long-term investors activities. 99% of the time, investors are “holding on to gains”, “holding on to losses”, or “not trading at all” in any particular market. Unfortunately, these common activities are rarely described, if ever. Instead, we only hear about endless rounds of “bargain hunting” and “profit taking”.