Race Trading Strategy: Part
Liquidity, Cash, News, Volatility And
The Herd Mentality.
and the Herd Mentality
is indeed a classic example of the herd mentality moving market prices.
REAL point of my analogy is that the herd mentality is magnified 100 times on
the Betting Exchanges.
about it this way.
Stock Brokers, Pension Fund managers, Full time professional Day traders
can get it so wrong with so much information, experience, qualified up
to their eyeballs, what do you think is happening dozens of times a day
on the betting exchanges where the majority of people are just having a “fun
traders sat and watched like rabbits frozen in the headlights. This is a
classic example that shows how only professional expertise and experience can assist in knowing
when to sell a stock.
are a few key internal mental debates that always prevent an
buying or selling:
stock is going up! Surely I would be foolish to sell because it might go
up some more?
index won’t correct or crash will it? Surely it will just keep
going up. I’ll wait till it starts falling before I sell!
stock has just plummeted; Surely it is not a company worth buying
The stock is soaring;
If I don’t buy in now
I’m going to have lost out?
4 statements may seem logical on first glance, but to an
trader all 4 statements are fundamentally incorrect for 3 reasons which
are just as simple as the statements are incorrect.
supply of a stock outweighs demand at any given price, the price
will fall and vice versa. It can be and still remains very difficult
to pinpoint exactly when this will happen. Hundreds of theories
abound, millions has been spent on research, and there are libraries
full of literature. Nobody has found an effective solution to
effectively predict market moves.
and events related or completely unrelated to your particular stock
can happen at any time and can directly affect the stock, or the
index that pertains to your particular stock. This can have a huge
effect on your stock price at any time. In the global economy, news
can come in at any time, day or night, and can affect your stock
price within minutes. Can you keep up with it all the time?
a stock crashes, the effect of the “herd mentality” can leave it
massively undervalued at which point although the stock may look
like it is in the doldrums it has actually become a “Value” buy.
This very much depends on the nature of the cause of the crash. If
the firm is going bust then it is never going to represent “Value”.
Similarly when it soars, it can end up massively overvalued and in
reality represents very poor value.
all this conflicting information stacked against you, it becomes obvious
why so many day traders fail and become disillusioned with the Stock
Market, and why the Betting Exchanges
are taking off the way they are.
good knowledge of Technical Analysis (TA) and Fundamentals combined with
personal experience of both winning and losing trades are the only ways
to profit long term from liquidity and volatility.
people interested in short term hedging,
scalping, swing and momentum trading who do not want the
prolonged agony and uncertainty of having medium or long term trades
open in the Stock Market, Horse Race trading with
the Betting Exchanges is becoming
THE medium of choice.
can pick your race and your horse.
know the exact time of the race.
can open your trade in the morning and close it in the afternoon.
can open it 15 minutes before the race and close out when the horses
are in the stalls.
can even wait till the race has started and take advantage of price
swings that would make a stock trader hide behind the sofa.
the end of each day you can log into your online Profit and Loss
account and sleep tight, or cry into your whisky, depending on the
is no global economy. There are no hurricanes, earthquakes, interest
rates or profit warnings. There is no setting the alarm clock for
opening time and there is no watching a static stock for months
waiting for the quarterly accounts.
the Fundamentals are free online at
And there are
free tools that I will show you how to
use in order that you can do some basic Betting Exchange
are paid for tools for those who really want to take TA to another
prices move so quickly that the absolute essentials are a real time
charting facility, and the ability to fire trades into the market within
microseconds, and I will show you a free tool that has these features.
importantly you will need some cash you can afford to lose
(unless you don't mind getting divorced :-), an open mind, and a dash of
Moral: If you do not make liquidity and volatility your best friends as
a trader, they will become truly feared enemies.
have to identify a trend early, disseminate all the information and
fundamentals, identify the risks, use Technical Analysis to get your
trade timing correct, get in early before the herd stampedes and
early before it peaks and they all run over the edge of the cliff.
you think the Stock market is volatile wait till you start trading
horses on the Betting Exchanges.