Always go with the herd. Is that a bad or good idea?

[patrick_fx]

Hello everyone,

I once heard someone said that always go with the herd (or majority). Is that a good idea? Here is what I thought. When lots of people agree to do the same thing at the same time, they unknowingly move the market. Am I right?

So, I don’t know if there is a place where I can find the information about which direction people think the market is going to go. Below is the Bloomberg weekly poll I’ve found from other forum. It’s kind of a bit out of date (about 3 to 4 days old).

BUY SELL HOLD
Euro 31 16 5
Yen 27 18 7
British pound 24 21 6
Swiss franc 24 19 8
Australian dollar 28 18 5
Canadian dollar 25 15 11
Euro versus yen 25 20 7

If anyone knows of such a page, please let me know. I think I should stick with the herd. What do you think?



Please share your thought, thanks :-)
Patrick

[yardie]

I am not a forex expert or anything. But I think its best you do some reading and learn Forex as oppose to trying to take the easy way out by following what others are doing. You are bound to lose your shirt doing this... Which is why there is a statistics going around that says only 10% or so of traders actually make money in Forex.

Originally Posted by patrick_fx

Hello everyone,

I once heard someone said that always go with the herd (or majority). Is that a good idea? Here is what I thought. When lots of people agree to do the same thing at the same time, they unknowingly move the market. Am I right?

So, I don’t know if there is a place where I can find the information about which direction people think the market is going to go. Below is the Bloomberg weekly poll I’ve found from other forum. It’s kind of a bit out of date (about 3 to 4 days old).

BUY SELL HOLD
Euro 31 16 5
Yen 27 18 7
British pound 24 21 6
Swiss franc 24 19 8
Australian dollar 28 18 5
Canadian dollar 25 15 11
Euro versus yen 25 20 7

If anyone knows of such a page, please let me know. I think I should stick with the herd. What do you think?



Please share your thought, thanks :-)
Patrick

[Whathell]

i think the best way for long term trades is to find the trend and buy/sell when your signals indicate a reverse back into the trend.

you can you follow the crowd when in the markets, every transaction has a buyer and a seller? which do you follow?

[Ogeima]

Follow the herd of winners, not the herd of losers! A bit more practically, that means follow the herd that makes the trend, not the herd that goes against it. What s left to do is to find how to catch the trends...

Btw, sentiment indicators like are just...indicators. An indicator is not a trend, it would be too easy.

[Whathell]

but the herd that makes new trends must go against the old trend

[patrick_fx]

Thanks for you guys opinions. I should have made it more clear about what type of herd I was talking about. I didn’t mean I go with just any herd, but the biggest herd (or the majority). I’ve been a trend follower since my first trading day. One day I asked myself “who create trends?”. Obviously, people create trends. Not just any people, the majority (or the biggest herd) create trends. If most people (more than 50%) buy/sell at the same time, don’t they move the market? My point is to be with the right herd (the majority herd, not the minority herd). Your further opinions are welcome :-)

[JohnJay]

Some people look at polls or they look at existing orders to see how many people are buying, selling or holding. The logic in this I suppose is that if there are more buyers waiting to get in the chances are that the price will go up. If there are more sellers waiting to get out, the chances are that prices will go down. In theory, this might work. The problem is that the opinions of all market participants change every second. Even though you think there are more buyers now, participants can and do constantly change their positions (long, short or flat).

Furthermore, operating in an uncentralised market like forex makes it very difficult, if not impossible for any organisation or broker to give traders an accurate number of how many buyers, sellers and holders there are in the world in any given moment since they only have access to the buy and sell orders made through their systems.

So in short, I do not think that this will work because we do not have a reliable source of information to base our decisions on and even if we did, what is true a second ago, will not necessarily hold true the next. Meaning, we might think that the bulls are the dominant heard, only to find out that by the time we join in, the bears have taken over and may even find that even some of the bulls have transformed into bears.

[patrick_fx]

Originally Posted by JohnJay

So in short, I do not think that this will work because we do not have a reliable source of information to base our decisions on and even if we did, what is true a second ago, will not necessarily hold true the next. Meaning, we might think that the bulls are the dominant heard, only to find out that by the time we join in, the bears have taken over and may even find that even some of the bulls have transformed into bears.

JohnJay, what you said is very true. Thanks for your opinion. I guess I'll move on... :-)