Small investors fall prey to daytrading practices in a manifestation of the "bigger fool" theory: This is the financial market version of "jumping on the bandwagon" -- without examining the actual worth of the stock or the company, traders blindly buy whichever stocks other traders are buying, building the illusion of a "hot" stock through rumor and daytrader behavior.

While large investors tend to have experience and a better appreciation for the fundamentals of the businesses in which they trade, poorly based decisions can affect the stocks of entire industries when large numbers of small investors get together to form a "medium-sized shark" (see www.daytraders.org). Because of the "Bigger Fool" theory, this can work until the market runs out of bigger fools, at which point an overvalued stock will come crashing down.

There is a widely held theory in economics called the Bigger Fool Theory, which states: Buy a stock and you'll make money as long as some other fool is willing to buy the stock from you at a higher price in order to sell it to an even bigger fool at an even higher price. (Crash, p. 15) Daytraders and others who ignore the business behind a stock, focusing instead upon rumors, hunches and trends, make their money because of this principle. It doesn't matter how overvalued a stock is as long as there are enough people who think they can still make a profit off of it. Networks of daytraders who follow the same strategies and listen to the same rumors often provide each other with the bigger fools necessary to make their profits. But what will happen when reality catches up? Arbel & Kaff cite this sort of phenomenom as contributing to Black Monday in 1987.