How to exploit the herd mentality and profit
As children, we are taught by our elders the basics of crossing the road in a safe and secure manner.
We are instructed that there’s a simple process we must adhere to.
We learn that there are definite rules to Think Stop and Look, before crossing.
The vast majority of traders do not have any checks in place before they enter.
As a result they cross the road at the red light and get immediately run over - to face imminent destruction.
Since they do not have checks in place, or should I say - they are not taught to undertake research and they believe every media event; we would be very wise to do the opposite of them…
To exploit the herd effectively, we need to undertake some simple inspection ourselves.
What steps are necessary in a trading plan?
Risk Management.
Do you know where your Stop Loss will be?
Where do you plan your Take Profit?
Do you know your position size and you are respecting risk to account?
The fxssi indicators will help as we can see how the majority of traders are positioned, and where they plan to exit (Order Book and Stop Loss Clusters).
Fundamental Research
Is the currency pair affected by Risk On / Off flows? USD and JPY will greatly move in a bullish or bearish scenario for indices, for example.
Is there a high severity data release, such as an Interest Rate decision or Central Bank press conference near?
Are there wider issues concerning government policy (Brexit and GBP, for example)
Crucial Sentimental Checks
Is the currency pair we’re looking to trade actually a “buy” or “sell”? If we examine the long / short ratios? Knowing that the vast majority of retail traders are typically counter-trend and emotional, they remain an important contrarian data source for us.
Is the currency pair more of a “buy” or “sell” over time? This requires a more intimate analysis, which is something I recommend you take time to study and examine, and why we pay particular attention to this in the Quasidb service.
Remember, we want shifting of sentiment over time to agree for confirmation. Which is something I am keen for everyone to understand, time contains the order flow and positioning data, so time is an incredibly important concept to grasp.
Technical Studies
Is the price above or below Pivot? (Daily, Weekly and / or Monthly)
Have we exceeded Average Daily Range (ADR). If we have, entering at that particular point in time would be fraught with excessive risks
Have we broken key supply or demand zones on a high timeframe, such as daily, weekly and monthly?
Finally, after you’ve undertaken all these checks - you’re ready to enter. But as you would crossing the street as a child, you would navigate across with extreme caution, and ideally you would require supervision (especially if new to trading).
This is why it is important to join a community of experienced traders who can advise you (from experience) on how to cross the road safely, and especially why it’s important for you (as an individual trader) to have a strict plan (or checklist) before entry.
You would never cross the busy highway without thinking nor looking.
If you did, you would never survive.
It’s just people were never taught to “cross the road safely”; and the large majority of traders will never learn, either through their lack of discipline and / or poor education.
And this is how we exploit the herd mentality, by becoming better, safer traders together.
Our telegram address: t.me/quasidb - all levels of experience are welcome!
I look forward to us profiting together.