Front Run the Market? That's a Bad Idea

Today's market runs as fast as it ever has, and not surprisingly that speed comes from the hyper high frequency traders and algorithmic trading programs.  Trying to catch up to a trend is nearly impossible, especially for those like me who look for a confirmation.  By the time a move is confirmed it may well be over!  Of course, using price targets, levels and objectives is useful but they are not always on target.

Some will 'front run' a potential trend, putting up capital on the 'hope' the trend turns, but that is just guessing.  If the market is moving fast, whips everyone around but goes nowhere (trendless), then you will eventually suffer from over-trading.  That, my friends - will soon be the end of your capital.

The problem with trying to get out in front even if the odds seem to favor it is that you really have no assurance a trend is established.  Hence, any flow or volume is not supported by follow-on buying (or selling), and you risk losing capital if the trend does not change in the direction you are expecting.  We estimate moves based on our knowledge at the time, experience in situation and probabilities. 

Our desire to be first or in front of everyone else is so great we often will risk it, a bad decision in most (but not all) cases.  Many believe they will miss it if they are not early, that's understandable.  But it's not unlikely that a confirmed move will just keep going.   In the end, you want to be careful risking your capital when a trend has not been confirmed or defined.


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