A plaque remaining from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem.

Above, a 1934 plaque from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem. Discarded as trash in 2006.

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Entry from April 03, 2013
Crowded Trade

A “crowded trade” occurs when the crowd (large masses of investors) all decide to buy or sell, creating large price swings in a short amount of time. The term was popularized by David Rocker’s article, “A Crowded Trade,” in Barron’s on March 15, 1999, where he wrote:

“A trading position is said to become ‘crowded’ when it is held by a vast preponderance of investors.”


Wikipedia: David Rocker
David A. Rocker (born 1943) is the founder of the hedge fund Rocker Partners, LP (now known as Copper River Management, LLC), and former columnist for TheStreet.com. After founding Rocker Partners in 1985, Rocker built the firm into one of the largest hedge funds specializing in short selling.

OCLC WorldCat record
The Crowded Trade - OTHER VOICES . Investors in big-cap stocks are embracing a fragile mystique.
Author: David Rocker
Publisher: Chicopee, Mass. : Dow Jones & Co., 1994-
Edition/Format: Article : English
Publication: Barron’s. (March 15, 1999): 52
Database: ArticleFirst

Barron’s
Other Voices | MONDAY, MARCH 15, 1999
A Crowded Trade
These big-cap investors are complacent now, but when they break ranks ...

By DAVID ROCKER
A trading position is said to become “crowded” when it is held by a vast preponderance of investors. Such positions develop when investors become so convinced of the logic of the position and its likely success that they become complacent.

Google Books
Too Good to Be True:
The Rise and Fall of Bernie Madoff

By Erin Arvedlund
New York, NY: Penguin Books
2009
Pg. ?:
So many hedge funds had sprung up that they were all buying and selling the same holdings—a phenomenon known as a “crowded trade.” Like a fire in a movie theater, when one starts to sell and the stock price drops, all the hedge funds run for the exits to sell too, driving the share price down even further. All the funds lose money.

Seeking Alpha
The Stock Market as a ‘Crowded Trade’
By Ted kavadas
Feb 28 2011, 16:16
One investing term that one hears less of is that of a “crowded trade.”

While I have yet to find a concise definition of such, I believe that a “crowded trade” has characteristics including the following:

. A large number of participants who have similar beliefs (i.e. a large imbalance of sentiment)
. A heavy presence of short-term speculators as opposed to long-term holders; this often includes “hot money”
. A history of rapid, significant price appreciation in the underlying asset(s) or sector

“Crowded trades” should be viewed with caution as these characteristics likely accentuate price moves and, at some point, volatility.

The Age (Melbourne, Australia)
So that we all speak the same language, a few definitions
July 2, 2011
Marcus Padley
(...)
Crowded trade: Something an international arbitrage trader once said to indicate an arbitrage had been traded away and which we now use to make us sound like international arbitrage traders, although all we’re doing is broking domestic Australian equities.

Of Two Minds by Charles Smith
TUESDAY, APRIL 02, 2013
The Crowded Trade: Buy-to-Rent Housing
Demographically, it appears there is a generational glut of single-family suburban homes on the horizon.

A trade is officially deemed “crowded” when everyone is rushing into the market with eyes only on the upside and little concern for the downside--for example, buying homes as rentals. Here’s a typical headline:

Investors Pile Into Housing, This Time as Landlords (source: WSJ.com)

Any market that gets crowded quickly experiences a corresponding rise in price and risk

Posted by Barry Popik
New York CityBanking/Finance/Insurance • Wednesday, April 03, 2013 • Permalink