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As oil prices pull back and look more and more like the exit of a commodity bubble I want to introduce traders to the (Greater Fool Theory) this is the idea a lot of traders use when prices first begin there retracement.

The idea behind the greater fool theory is that it is possible to make money by buying in an overvalued market and later selling them at a profit because there will always be someone that is (a bigger fool) who is willing to pay the higher price.

When acting in accordance with the greater fool theory, an investor buys at a questionable price not with any regard to fundamentals or technicles, but with the hope of quickly selling them off to another investor (the greater fool), who is also hoping to flip it quickly. Unfortunately, speculative bubbles always burst eventually, leading to a rapid depreciation in price due to the selloff. I would caution any trader from trading on the moment of the volatility; rather look for the movement of the volatility.

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