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Originally Posted by Trader01
Because I don't want to be associated with them! They are strictly for one's dining pleasure. 
On a more serious note:
You've stumbled into possibly the best, the baddest, the most artistic Indicator of them ALL. But it takes skill, judgement & patience to use it wisely and therefore, profitably. There is nothing automatic about it. It is also known by its more common name, Sentiment!
At important turns the herd is almost always wrong.
The louder and more vociferous their certainty, the more your profits will exponentialize by doing the opposite.
In Forex where can the habits of the herd be observed?
There is one excellent place to observe them grazing unmolested and untrammeled in their frenetic haste to lose money -- ????
But an alternative dwelling is right here at MoneyTec; just go to the real-time forum, pick your instrument (Eur/Usd or whichever) and do a quick calculation of the directional calls. What you're looking for is "where is the overwhelming majority going and how emotional are they in their exuberance?"
It takes work, observation, judgement & patience and above all, timing -- precisely the reasons why most will not take the time to get good at it.
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I have to disagree. What the herd is doing is very important. You want to be following the herd. It is correct that they are wrong at tops and bottoms, but most things are. Plus, top and bottom picker become cotton pickers. Price is what matters and the only thing about price that matters is which way it is going right now.
"The market is a rather sophisticated auction and while the uderlying fundamentals are important over the long term, over the short term prices are driven by two emotions...........
Fear and
Greed ".
When there are "more" buyers than sellers, for whatever reason,
PRICES WILL ADVANCE. . Conversly, when there are "more" sellers than buyers, for whatever reason,
PRICES WILL DECLINE . So, how do you use that information: If you
BUY when there are more buyers than sellers,
YOU MAKE SOME MONEY. If you short sell when there are more sellers than buyers,
YOU MAKE SOME MONEY .
Now, technically, there is a buyer for every seller, so there can not be more of any one type. It may be more accurate to say one group is more enthusiastic than another. This doesn't change anything, however, as you would want to
BE ON THE SIDE WITH THE MOST ENTHUSIASM to make money. Therefore, you want to be able to measure the enthusiasm of the Herd. Again, while not technically correct, we can think of more buyers than sellers, when it really is buyers more willing to buy at one point in time, then sellers willing to sell at that same pioint. Hence prices rise.
By using indicators that help tell us when there are more buyers than sellers, or vice versa, we can get in tune with what side (bulls or bears) is moving the market. In other words, the herd leaves disticnt footprint on the market and we can attempt to follow those footprints.
Check out the chart below. The middle indicator is the Balance of Power. Red means the bears are in charge, blue means the bulls are. (This is true of all indicators on chart). The top indicator, VRatio (dii) , looks at how much volume is associated with changes in price. The candles colored based on price momentum. The dotted line is MeanSwing. This is the the line in the sand, and is determined by the support and resistance bands (not shown). The green lines are on the pivot highs and lows.
By using pivot patterns, momentum alignment, volume momentum, and the relationship of price to support and resistance, we are able to difine and trade in the direction of the trend.
Therefore, in essence, as trend traders we are always.......
RUNNING WITH THE HERD