Stay Independent from the Herd

July 2, 2010

It's true for most of us in social situations, in business, and in family relationships.

As traders, it can be true for our involvement with the markets, too.

We naturally tend to follow the herd.

It's a universal human trait. It's only natural.

We want to be accepted. We want to be well-liked, and to feel that we're an important part of a group. We may define that group in terms of our neighborhood, our nationality, our ethnic background, or our favorite TV show.

But no matter how we define it and how we create the boundaries and protocols that let us know "who's in" and "who's out," we like to feel that we belong.

And so we follow the herd.

If you hope to succeed as an astro-trader, however, you have to find a way to ignore that urge. Whenever you see a herd reaction in the markets-jumping on the bandwagon with a hot new stock, responding to a rumor about an impending merger, liquidating positions in a hurry because there's an unnamed threat about to bring the market down-turn around and run, don't walk, toward the nearest exit.

When the herd is going one way, and you choose to go another, you'll usually wind up feeling glad about it later.

In almost any area of your life, a little independent thinking can be a real asset. But when you're trying to survive as an astro-trader, it's absolutely essential.