The HERD

Sometimes you need to step back from trading for a minute, realize your are human... a mammal actually, then go back to your desk and trade accordingly. What does this mean? Well lets take a look at one of the more common behaviors of a mammal... herding. We all know what a herd is. Lets look at the definition more closely:

When an association of animals (or, by extension, people) is described as a "herd", the implication is that the group tends to act together (for example, all moving in the same direction at a given time), but that this does not occur as a result of planning or co-ordination. Rather, each individual is choosing behaviour that corresponds to that of the majority of other members, possibly through imitation or possibly because all are responding to the same external circumstances.

 

 

Now take a look at a stock like GOOG (GOOGLE) over the past few days. Yes, it did break to new highs recently. But yesterdays sell-off, and todays weakness is more folks following the herd then anything else. Sometimes following the herd can be very profitable, if your looking for long term holds. But as a short term trader, following the herd can be very frustrating.

Timing the herd is the key to profits. This means finding where GOOG will bounce off support and get in before the herd takes it to $700+. That may have happened today, as GOOG bounced off its 50DMA on high volume.

We are going long the calls. Check out our chatroom for the trade ideas.

The chat room will be available to ALL registered members throughout the month of January! Be sure to register before February as a Chat or Options Education Member in order to continue enjoying the chat after this month!

 

 

Profile photo of jimmybobJimmyBob (Scott)has been trading equities for over 15 years, a majority of which were OTC micro-cap stocks. He started trading high risk stock options over the past 7 years, and has proven winning trades in excess of 15,000%.

As one of the Co-Founders of optionmillionaires.com, Scott enjoys sharing his knowledge with other investors through timely blog posts, daily watch lists in the forum, weekly webinars, and helpful advice within the chatroom.

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