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Username: Maria

Rating:
Guru Stars

Asked to: Heng Kim

Date Created: 21 Jan 2019
Category 28
Tag Financial
Question What is Pain Trade?
Advice from Guru
Hello Maria,

Pain trade is the tendency of markets to deliver the maximum amount of punishment to the most investors from time to time. A pain trade occurs when a popular asset class or widely followed investing strategy takes an unexpected turn that catches most investors flat-footed. Under this definition, a sudden reversal in a niche sector or strategy would not qualify as a pain trade, since not many investors are likely to be in it. Pain trades sorely test the resolve of even the best traders and investors, since they must face the dilemma of whether to hold on in the hope that the trade will eventually work out, or take their losses before the situation worsens.

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