No, not the fear you’re thinking of, the other kind of fear, the fear of missing out.

Many people believe there are two emotions that traders feel, fear and greed, I disagree, it’s only fear.  The fear of loss and the fear of not having enough.  There’s a difference between being greedy and being fearful of not having enough, and it’s important.  Greed is defined by the excessive desire to possess wealth or goods.  Synonyms include lust and gluttony.  The fear of not having enough is very different, and I believe that is what drives market participants.

Trading is inherently a competitive exercise.  We look across the desk at the guy next to us and see that he made X amount of dollars today and we made less.  We look at the major averages as benchmarks, we listen to people taking profits on our StockTwits stream and feel both happy for them and wanting to punch them in the face for making a better trade on the same stock.  It’s only natural.  And when the market is moving well, not being involved while everyone else is, while your benchmark is climbing, traders can feel a considerable amount of fear.

I’ve felt this many times, the fear of not having enough.  And I’ve become pretty good at gauging both my own emotions regarding this and the pulse of the market as a whole.  Many times this emotion can be seen exhibited in the price action through a blow off top where price accelerates at the end of a big move and then reverses sharply.  Intermediate term swing and position trading is about staying with the trend and not getting shaken out, while managing your risk well.

When the market has been in an uptrend for a while and the price action is starting to get a little giddy, it’s time to start looking for the fear.  This morning was the first time I really saw people reversing course and trying to buy into a market they didn’t want to for fear that they were missing out on the party.  That is a dangerous thing.  So I began to sell down partial positions.

We’ve had a great run, don’t be afraid to take some off the table, wait for pullbacks in your individual names and load up again.  What confuses me a little bit, is that I’m not feeling that fear of not being long enough, or high beta enough.  I can chalk this up to one of two things.  Either we are set to go higher because this market hasn’t scared enough people in yet, or my trading has been just that good, and that with a 78% long, 22% short book, I have been matching this market step for step during this rally, literally.  I am literally at zero on my alpha for the quarter and up about 11%.

We will see which it is soon enough, but I think taking a little off the table in a few positions is the smart course of action.  It will allow you to hold the rest through a pullback and not get shaken out of the intermediate term trend.