This is what I do. If the herd wants to go north, we also go north. If the herd wants to reverse to go down, we also reverse to go down. If the herd wants to go south, we also go south. If the herd wants to reverse to go up, we also reverse to go up. If the herd is confused and don't know whether to go north or south, we leave the herd and let the herd sort things out on their own. ALTERNATIVELY you can do this : If the herd wants to go north, you go south. If the herd wants to reverse to go down, you go up. If the herd wants to go south, you go north. If the herd wants to reverse to go up, you go down. If the herd is confused and don't know whether to go north or south, you just pull trigger to go north and / or south.
I think this is a great question. You can use traditional tools, nontraditional tools, quantitative, statistical, contrary, etc. People can poke holes in each of the above methods as far as their value, and the most common advice provided is what not to do. I find that those who know how to defy reactionary genetic DNA are the ones who are the most successful traders. They have above average risk tolerance, ability to recover from psychological pain and the ability to continue. You may find that these people do not use "magical" methods but do engage in very extensive research when it comes to their methods.
Indeed. Maybe an extreme example of success, but nevertheless, look at Bridgewater. Ray Dalio started from discretionary research, progressed to mechanical, and now utilizes algorithmic decision making. A prime example of how a firm should run and evolve with the times.
Years and years of research. Only last 2 years started to see some light. In the beginning you don't know how to look and what to look for. Backtesting and finding ways to avoid statistical spikes is where it's at, but before that you also benefit from learning ABC (general TA concepts). Trading with the herd is way easier than predicting herd turns. For the latter, I wouldn't even know where to begin without survivorship bias. So you may in the end find staying ahead of herd impractical and dangerous!
@rin4et Just do what speedo said and someday you may breakaway from the herd and find yourself in the (successful) minority.
Many 'expert's say do not follow the herd but they did not communicate clearly. Let's say there are 1000 buffalos charging in a particular direction. You should be the in the first few position, not last few position. How does that apply to trading? Let's say the market is up. You should enter early when the price just starts to go up. You should not enter late when price has already gone sky high.