Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Recommended Posts

I was watching the Benny Hill show and there was this skit which I found both funny but made me think. There was a man (Benny) who was standing in front of a plain brick wall and looking up. He just kept on standing there. A man walks by and sees Benny standing in front of the wall and wonders whats going on so he stands next to Benny and starts looking up as well. Another person comes, then another, and another and soon there is a small crowd of people all looking up at this plain brick wall. Benny then steps back and walks away while everyone keeps on staring up at this brick wall. The catch is that the whole time he had a neck brace on which wasn't initially visible cause of his coat so he was forced to keep on looking up.

 

Point being: group mentality and mass delusions do exist.

 

My question for the doc then in terms of trading: What is the best way to spot the sheep during your trading day and what makes people instinctively act like sheep when they trade?

 

On Jame's videos he often reades the tape which I'm slowly trying to learn because it seems to give information as to where moves begin and end. Is there a way you can train yourself to learn who is actually being proactive and who is being reactive?

If you can spot the real proactive movers from the rest and move as they do or even learn to anticipate their moves this would give you a great edge against the 95% of followers who cough up their hard earned.

Share this post


Link to post
Share on other sites

This is a very interesting observation and question. The problem with electronic trading as opposed to trading on floor is that we cannot see the emotions and crowd mentality taking place like a floor trader would looking at the pit with people hollering and screaming and expressions in their eyes. Tape reading is difficult in this manner due to lack of these cues. The only cue is the price being broken and by how much and by how many contracts at that price. This is why trading is so difficult, putting together a puzzle that have missing pieces.

Share this post


Link to post
Share on other sites

Great question! In trading and life, there is what is called the herding instinct or herding bias. You see if when momentum traders jump all over something because it is moving ( usually up, but also down if they are nible with shorting). For fundamental people, it is this herding which contributes to what might best be described as irrational valuations ( which one way or the other get back to mean reversion once the people wake up and realize what has been going on). One way to look for herding is to watch stocks with high volume premarket and see how they behave on any pullbacks. What momentum traders look for is a gap up on volume and then a pullback on lower volume ( to get long). With futures trading, you can sometimes tell with market depth and time and sales. It is not easy, and the programs are getting more and more sophisticated and tricky so this is an ongoing issue. One thing that is happening to bond traders is not so much fun. Many of them have left the floor now ( there are very few bond traders in open outcry) and gone to electronic trading. They are getting slammed by the programs which come in and "trap" them so they are stuck in a position with no way out, sometimes for an entire day ( when previously they were able to scalp in and out very quickly). There is much frustration in bond land because of this, and many bond traders have found their incomes cut in half or by a third. Some of them are using their core competencies to move into oil or ags. The majority of them are still trying to figure out how to beat the algorithmic programs. As program trading increases, it is going to be more difficult for the little guy to scalp and there is going to be a lot more "deception." For example, there is a program operating on the CAC 40 called Predator which fires thousands of orders into the CAC every day, most of which are not executed. The same thing is happening on ES, I believe.

This is the tip of a very deep iceberg. I would love to hear from others on this board about your experience with either herding or ( ugh!) being herded!

 

Thanks

 

Janice

Share this post


Link to post
Share on other sites

I typed my response very quickly and made a number of typos! So- I am posting it again. Apologies. Janice

 

Great question! In trading and life, there is what is called the herding instinct or herding bias. You see it when momentum traders jump all over something because it is moving ( usually up, but also down if they are nimble with shorting). For fundamental people, it is this herding which contributes to what might best be described as irrational valuations ( which one way or the other get back to mean reversion once the people wake up and realize what has been going on). One way to look for herding is to watch stocks with high volume premarket and see how they behave on any pullbacks. What momentum traders look for is a gap up on volume and then a pullback on lower volume ( to get long). With futures trading, you can sometimes tell with market depth and time and sales. It is not easy, and the programs are getting more and more sophisticated and tricky so this is an ongoing issue. One thing that is happening to bond traders is not so much fun. Many of them have left the floor now ( there are very few bond traders in open outcry) and gone to electronic trading. They are getting slammed by the programs which come in and "trap" them so they are stuck in a position with no way out, sometimes for an entire day ( when previously they were able to scalp in and out very quickly). There is much frustration in bond land because of this, and many bond traders have found their incomes cut in half or by a third. Some of them are using their core competencies to move into oil or ags. The majority of them are still trying to figure out how to beat the algorithmic programs. As program trading increases, it is going to be more difficult for the little guy to scalp and there is going to be a lot more "deception." For example, there is a program operating on the CAC 40 called Predator which fires thousands of orders into the CAC every day, most of which are not executed. The same thing is happening on ES, I believe.

This is the tip of a very deep iceberg. I would love to hear from others on this board about your experience with either herding or ( ugh!) being herded!

 

Thanks

 

Janice

Share this post


Link to post
Share on other sites

That's great insight, doc! Interesting how changing the style of trading affect other people as the markets and technologies change, the inevitable. It may be that more programs create less herd instincts? Or are there still emotional people behind these programs plug and unplug whenever they "feel" it?

Share this post


Link to post
Share on other sites

People program the programs. It becomes less and less emotional when the machines are programmed to trade on "their own." From what I understand there are still human beings who trade the programs, so there might be less emotion involved. Eventually, I think machines will be trading machines and machines will be programming themselves. We're not there yet, but look at what Kurzweil is going with FatKat.

 

Janice

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • NFLX Netflix stock watch, local support and resistance areas at 838.12 and 880.5 at https://stockconsultant.com/?NFLX
    • NFLX Netflix stock watch, local support and resistance areas at 838.12 and 880.5 at https://stockconsultant.com/?NFLX
    • Hello citizens of the U.S. The hundred year trade war has leaked over into a trading war. Your equity holdings are under attack by huge sovereign funds shorting relentlessly... running basically the opposite of  PPT operations.  As an American you are blessed to be totally responsible for your own assets - the govt won’t and can’t take care of you, your lame ass whuss ‘retail’ fund managers go catatonic  and can't / won’t help you, etc etc.... If you’re going to hold your positions, it’s on you to hedge your holdings.   Don’t blame Trump, don’t blame the system, don’t even blame the ‘enemies’ - ie don’t blame period.  Just occupy the freedom and responsibility you have and act.  The only mistake ‘Trump’ made so far was not to warn you more explicitly and remind you of your options to hedge weeks ago.   FWIW when Trump got elected... I also failed to explicitly remind you... just sayin’
    • Date: 7th April 2025.   Asian Markets Plunge as US-China Trade War Escalates; Wall Street Futures Signal Further Turmoil.   Global financial markets extended last week’s massive sell-off as tensions between the US and its major trading partners deepened, rattling investors and prompting sharp declines across equities, commodities, and currencies. The fallout from President Trump’s sweeping new tariff measures continued to spread, raising fears of a full-blown trade war and economic recession.   Asian stock markets plunged on Monday, extending a global market rout fueled by rising tensions between the US and China. The latest wave of aggressive tariffs and retaliatory measures has unnerved investors worldwide, triggering sharp sell-offs across the Asia-Pacific region.   Asian equities led the global rout on Monday, with dramatic losses seen across the region. Japan’s Nikkei 225 index tumbled more than 8% shortly after the open, while the broader Topix fell over 6.5%, recovering only slightly from steeper losses. In mainland China, the Shanghai Composite sank 6.7%, and the blue-chip CSI300 dropped 7.5% as markets reopened following a public holiday. Hong Kong’s Hang Seng Index opened more than 9% lower, reflecting deep concerns about escalating trade tensions.           South Korea’s Kospi dropped 4.8%, triggering a circuit breaker designed to curb panic selling. Taiwan’s Taiex index collapsed by nearly 10%, with major tech exporters like TSMC and Foxconn hitting circuit breaker limits after each fell close to 10%. Meanwhile, Australia’s ASX 200 shed as much as 6.3%, and New Zealand’s NZX 50 lost over 3.5%.   Despite the escalation, Beijing has adopted a measured tone. Chinese officials urged investors not to panic and assured markets that the country has the tools to mitigate economic shocks. At the same time, they left the door open for renewed trade talks, though no specific timeline has been set.   US Stock Futures Plunge Ahead of Monday Open   US stock futures pointed to another brutal day on Wall Street. Futures tied to the S&P 500 dropped over 3%, Nasdaq futures sank 4%, and Dow Jones futures lost 2.5%—equivalent to nearly 1,000 points. The Nasdaq Composite officially entered a bear market on Friday, down more than 20% from its recent highs, while the S&P 500 is nearing bear territory. The Dow closed last week in correction. Oil prices followed suit, with WTI crude dropping over 4% to $59.49 per barrel—its lowest since April 2021.   Wall Street closed last week in disarray, erasing more than $5 trillion in value amid fears of an all-out trade war. The Nasdaq Composite officially entered a bear market on Friday, sinking more than 20% from its recent peak. The S&P 500 is approaching bear territory, and the Dow Jones Industrial Average has slipped firmly into correction territory.   German Banks Hit Hard Amid Escalating Trade Tensions   German banking stocks were among the worst hit in Europe. Shares of Commerzbank and Deutsche Bank plunged between 9.5% and 10.3% during early Frankfurt trading, compounding Friday’s steep losses. Fears over a global trade war and looming recession are severely impacting the financial sector, particularly export-driven economies like Germany.   Eurozone Growth at Risk   Eurozone officials are bracing for economic fallout, with Greek central bank governor Yannis Stournaras warning that Trump’s tariff policy could reduce eurozone GDP by up to 1%. The EU is preparing retaliatory tariffs on $28 billion worth of American goods—ranging from steel and aluminium to consumer products like dental floss and luxury jewellery.   Starting Wednesday, the US is expected to impose 25% tariffs on key EU exports, with Brussels ready to respond with its own 20% levies on nearly all remaining American imports.   UK Faces £22 Billion Economic Blow   In the UK, fresh research from KPMG revealed that the British economy could shrink by £21.6 billion by 2027 due to US-imposed tariffs. The analysis points to a 0.8% dip in economic output over the next two years, undermining Chancellor Rachel Reeves’ growth agenda. The report also warned of additional fiscal pressure that may lead to future tax increases and public spending cuts.   Wall Street Braces for Recession   Goldman Sachs revised its US recession probability to 45% within the next year, citing tighter financial conditions and rising policy uncertainty. This marks a sharp jump from the 35% risk estimated just last month—and more than double January’s 20% projection. J.P. Morgan issued a bleaker outlook, now forecasting a 60% chance of recession both in the US and globally.   Global Leaders Respond as Trade Tensions Deepen   The dramatic market sell-off was triggered by China’s sweeping retaliation to a new round of US tariffs, which included a 34% levy on all American imports. Beijing’s state-run People’s Daily released a defiant statement, asserting that China has the tools and resilience to withstand economic pressure from Washington. ‘We’ve built up experience after years of trade conflict and are prepared with a full arsenal of countermeasures,’ it stated.   Around the world, policymakers are responding to the growing threat of a trade-led economic slowdown. Japanese Prime Minister Shigeru Ishiba announced plans to appeal directly to Washington and push for tariff relief, following the US administration’s decision to impose a blanket 24% tariff on Japanese imports. He aims to visit the US soon to present Japan’s case as a fair trade partner.   In Taiwan, President Lai Ching-te said his administration would work closely with Washington to remove trade barriers and increase purchases of American goods in an effort to reduce the bilateral trade deficit. The island's defence ministry has also submitted a new list of US military procurements to highlight its strategic partnership.   Economists and strategists are warning of deeper economic consequences. Ronald Temple, chief market strategist at Lazard, said the scale and speed of these tariffs could result in far more severe damage than previously anticipated. ‘This isn’t just a bilateral conflict anymore — more countries are likely to respond in the coming weeks,’ he noted.   Analysts at Barclays cautioned that smaller Asian economies, such as Singapore and South Korea, may face challenges in negotiating with Washington and are already adjusting their economic growth forecasts downward in response to the unfolding trade crisis.           Oil Prices Sink on Demand Concerns   Crude oil continued its sharp slide on Monday, driven by recession fears and weakened global demand. Brent fell 3.9% to $63.04 a barrel, while WTI plunged over 4% to $59.49—both benchmarks marking weekly losses exceeding 10%. Analysts say inflationary pressures and slowing economic activity may drag demand down, even though energy imports were excluded from the latest round of tariffs.   Vandana Hari of Vanda Insights noted, ‘The market is struggling to find a bottom. Until there’s a clear signal from Trump that calms recession fears, crude prices will remain under pressure.’   OPEC+ Adds Further Pressure with Output Hike   Bearish sentiment intensified after OPEC+ announced it would boost production by 411,000 barrels per day in May, far surpassing the expected 135,000 bpd. The alliance called on overproducing nations to submit compensation plans by April 15. Analysts fear this surprise move could undo years of supply discipline and weigh further on already fragile oil markets.   Global political risks also flared over the weekend. Iran rejected US proposals for direct nuclear negotiations and warned of potential military action. Meanwhile, Russia claimed fresh territorial gains in Ukraine’s Sumy region and ramped up attacks on surrounding areas—further darkening the outlook for markets.   Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Andria Pichidi HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • AMZN Amazon stock watch, good buying (+313%) toi hold onto the 173.32 support area at https://stockconsultant.com/?AMZN
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.