Pain Trade
The market move that would hurt the most people, which, annoyingly, often seems to be the one that happens.
In plain English
The market move that would hurt the most people, which, annoyingly, often seems to be the one that happens.
The pain trade is the direction that would cause the most damage to the most traders. If almost everyone is betting the dollar will fall, the pain trade is a dollar rally, because it forces all those people to scramble out of losing positions, and their scrambling pushes the price even further.
It is why crowded trades are dangerous. When sentiment is lopsided, the fuel for a sharp reversal is already sitting there, waiting for a spark. See also short squeeze.
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