Markets do not offer the same patterns that life has presented to us in one million years of evolution. Continuous moves lead to sharp reverals and volatility clusters in an unmanageable way. Thus, we identify regularity in clustered directional moves and contextuality when these have already happened. And that is when the reversal comes.
It is not surprising that relatively few people can master this. As the experimental physicist can master something so far away from basic evolution as the manipulation of particles beyond the atom, prominent investors identify patterns different from what life provides.
I read an interview to Rick Rule (yes, despite appearing a lot in KWN) sums up the previous ideas. The summary is taken from Zerohedge (link):
What's important is that good markets are for selling and bad markets are for buying; it's counterintuitive. Your perception of how events will play out in the future is determined mostly by your experience in the immediate past; and if the last three investment decisions that you've made have rewarded you – if you feel good about your precepts – you begin to do something natural, which is confuse a bull market with brains, and you begin to become very aggressive. If your last three decisions – irrespective of whether they were well thought out – haven't played out so well, you become cautious. What you need to do is teach your brain to overwhelm or overrule your heart and understand that cheaper is better and more expensive is less good. It's difficult, but it must be done. Many things that are rewarding are difficult.This is the idea underlying my decision to open a long position in EURUSD. There initially was a bounce and I saw no strength (I hoped it closed the gap 1.3050 - 1.31, which it did not), but I made the mistake of marrying that position and then it became a losing one. Since this position is extraordinarily small under 10K EUR long, I can afford the luxury of retaining it and use a spike to close it. It will count as a fail and the marriage mistake and consequent overview of the lack of strength is noted.
"The time to buy is when there's blood in the streets"
Baron Rothschild in the 1800's