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How do you interpret/implement this statement?
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How do you interpret/implement this statement?

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How do you interpret/implement this statement?

I have seen statements close to this for a while and I would love to hear how others "implement/interpret" this statement:

Markets are the result of crowd behavior, trade the crowds, not the markets!

How do you trade the crowd, how do you not trade the market?

Thanks!

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NJAMC View Post
I have seen statements close to this for a while and I would love to hear how others "implement/interpret" this statement:

Markets are the result of crowd behavior, trade the crowds, not the markets!

How do you trade the crowd, how do you not trade the market?

Thanks!

First of all, I would say this does not apply to scalping or day trading but mostly to larger swing or position trades. When I say doesn't apply I mean in a useful way, obviously everything applies at some level, but the returns are so tiny on smaller scales they are not worth it IMO.

Trading the crowd behavior generally referrers to the way people take profits or risks, in other words the psychological decisions that individual traders make are sometimes very similar across the universe of traders, which results in the market doing something in uniform.

You can observe patterns after a stock runs up that there will be a slight drawdown again as people take profits. I am doing a lot of analysis in this area with my new platform, scanning the behavior of 5,000 tickers on a daily basis and how this plays out. I suggest taking a look at it.

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This is how I interpret this statement

Whether I am correct I have no idea. But it is what I believe so thats all that matters to me
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To me anyone who is currently in profit is a target of the crowd. Like politics the higher you are
the more you become a target. In this case if you are holding a profitable position I expect the crowd to challenge it
and take it from you if they can.

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Semantics.

Trade the price.

"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
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although we are trying to apply the less-emotional approach to trading, the crowd is emotional.

the crowd is the bandwagon analogy, slow to start, slow to continue, but then when the party is obvious, the crowd piles on, then the earlier movers of the move take profits others exit and the final move can look extended, exhausted and the late comers are trapped

it doesn't matter who they all are, some are machines, hft's, institutions, some have longer term goals and don't mind the late entry, others are scalpers, etc

the crowd looks like a highly emotional group using irrational motivations for their entries and exits

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jaytrades View Post
although we are trying to apply the less-emotional approach to trading, the crowd is emotional.

the crowd is the bandwagon analogy, slow to start, slow to continue, but then when the party is obvious, the crowd piles on, then the earlier movers of the move take profits others exit and the final move can look extended, exhausted and the late comers are trapped

it doesn't matter who they all are, some are machines, hft's, institutions, some have longer term goals and don't mind the late entry, others are scalpers, etc

the crowd looks like a highly emotional group using irrational motivations for their entries and exits

What a great post- Thank You

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jaytrades View Post
it doesn't matter who they all are, some are machines, hft's, institutions, some have longer term goals and don't mind the late entry, others are scalpers, etc

the hell it doesn't !

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NJAMC View Post
I have seen statements close to this for a while and I would love to hear how others "implement/interpret" this statement:

Markets are the result of crowd behavior, trade the crowds, not the markets!

How do you trade the crowd, how do you not trade the market?

Thanks!

Good analogy presented by Lance Beggs to explain this concept.

In a Nutshell, trading is not a game of fundamental or technical analysis. Trading is a game of understanding people and how they make decisions.

Rock Paper Scissors - A Trading Analogy! | Articles-Strategy

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Big Mike View Post
First of all, I would say this does not apply to scalping or day trading but mostly to larger swing or position trades.


I'd disagree - a lot of scalping is based around who is positioned right now, which prices will be immediately defended & where the pain points are.

In terms of crowds - best analogy I heard (and I can't recall where) was this....

"Look at a shopping mall with 5000 people in it, try to predict where the people will be in 15 minutes time. How do you do that? Well you can't can you. Unless you hit the fire alarms".

Predicting crowd behavior is fine but the crowd still needs a catalyst to go one way or the other.

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