The term “pain trade” was defined in a Barron’s May 2008 article,  “Rx for the ‘Pain Trade.’” as “the market conditions that will cause the most discomfort for traders.” An August 2007 blog post defined “pain trade” as “the trade that frustrates and causes the most pain for the majority, usually at extremes.” The financial industry has used “pain trade” since at least June 2005.
 
A trade in any potentially bearish market has been described as a “pain trade.”
 
 
Financial Express
An American story of changing fortunes
V Anantha Nageswarn
Posted: Saturday, Jun 04, 2005 at 0000 hrs IST
(...)
The London Financial Times reports that bets on its yield drifting higher are being called the ‘pain trade,’ as managers who bet on rising yields were forced to cover their bets with the bond yield relentlessly drifting down in the last two months.
 
Minyanville
A Crisis in Confidence: The Fed Reacts
By Bennet Sedacca Aug 27, 2007 2:17 pm
I pride myself on being open-minded and ready for most anything in the markets. Markets have a habit of doing the unexpected, particularly when the majority doesn’t expect it. In Wall Street circles, this is referred to as the ‘pain trade’.
 
The pain trade, simply stated, is the trade that frustrates and causes the most pain for the majority, usually at extremes.
   
Barron’s
The Striking Price | MONDAY, MAY 12, 2008
Rx for the “Pain Trade”
By DENNIS DAVITT and EDWARD K. TOM
Slow, grinding rally in stocks is a headache for options traders.
AN OLD TRADER’S TRICK TO discern the mood and sentiment of the market is to listen for the catchphrases making the rounds on the trading floor. Last week, by sheer volume, the most prevalent one was: “the pain trade.”
 
The pain trade refers to the market conditions that will cause the most discomfort for traders. As of late, the pain trade is defined as a slow, grinding rally in the equity markets. This stems from the observation that most fund managers seem to be underweight U.S. stocks versus commodities, emerging markets and other asset classes.
   
Seeking Alpha
The Equity Pain Trade
by: Macro Man
August 18, 2008
Unfortunately, it will be another day or so before Macro Man can fully re-engage with markets (or at least the market blogosphere), as he is laid up with some sort of bronchial ailment that he picked up lamentably early in his holiday.   
     
New York (NY) Times
Just How Low Will the Dow Go?
By CONRAD DE AENLLE
Published: February 13, 2009
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Potentially good news is that a clean break above the trend line could lead to substantially higher prices. Mary Ann Bartels, a technical research analyst at Merrill Lynch, identified 1,000 on the S.& P. 500, or about 9,500 on the Dow, as “the pain trade.”
 
She meant that above that level, portfolio managers who have been on the sidelines will feel as if they are significantly underperforming. They could be forced to buy, propelling the averages much higher; the S.& P. could reach 1,325 this year, with sectors like technology, materials and energy equipment and services leading the way, she said.
 
Technically Speaking, Market Analysis and Theory
Wednesday, May 27, 2009
Where Is the Pain Trade?
Traders sometimes talk in terms of the ‘Pain Trade’, the market’s ability to cause the most pain to the most people. The pain trade has been up, where those short or even expecting a correction to the 50 period moving average (865 on the SPX) haven’t gotten it. 
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COMMENTS
Anonymous said…
I don’t think “pain trade” means what this blog just said. It is not what causes the most pain to the most people, though that is a decent editorial comment. I argue instead that it is a desperation trade in the context of assumed difficulty. People assume that everyone experiences pain, and they take a hit so that they can test their strategy. The time unfolds and we find out who traded wisely. We all like to believe that there should be no planned pain in a good system… pain trading is about the belief that this is a fantasy.
8:36 PM
   
Google Books
Finance at the Threshold:
Rethinking the Real and Financial Economies
By Christopher Houghton Budd
Farnham: Gower
2010
Pg. 25:
Other such terms include ‘haircut’, ‘the pain trade’, iiar loan’, etc.
 
Daily Markets
The Pain Trade
By Michael Panzner on September 15, 2010
Ahhh, I think I figured it out.
 
The bulls keep getting whacked with the economic equivalent of a baseball bat — see below for the latest example — and yet they come back for more.
 
Erwan Mahe’s Instablog
The Pain Trade: Bull Bonds!
Jan 12, 2011 4:39 AM
The term, pain trade, refers to those moments when financial markets catch the consensus going the wrong way, thus, wrecking havoc on positions accumulated over the preceding weeks.
 
Zero Hedge
The Pain Trade…
Submitted by Tyler Durden on 08/19/2011 07:25 -0400
From Peter Tchir of TF Market Advisors
...Is waking up in the morning.  The pain trade is making decisions in a market where moves that should take days or weeks to play out, occur in hours.  Going for a coffee at the wrong time can cost you to miss a 2% move.  Leaving a stop while going for coffee can get you triggered out in a move that completely reverses in a few minutes.  The markets are broken.  That is the pain trade.  Trying to treat the markets as normal is the pain trade.