How to Read the Trading Crowd

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This e-book looks at various means that analysts use to get a reading on what the trading crowd is thinking and where it may take prices. This includes chapters on:

  • 'Behavioral finance' and technical analysis
  • Making 'contrary opinion' work for you
  • Measuring market 'noise'

Most books that deal with trading psychology tend to be about the individual trader’s mental approach to markets and how the trader can work on developing skills to cope with emotions like fear, greed and hope. There is certainly plenty of material to consider, and all of it is important in helping traders master themselves before they try to master the markets. But what about the market as a whole?

We know markets reflect thousands of individual opinions and that the current price is the collective result of all those opinions. We know how difficult it often is to gauge our own emotional reactions to price action, but if we have a trading plan and the discipline to follow it, we have some control over what we do. But what will everyone else do? How can we look at the mass psychology of the whole trading crowd and decipher where human behavior might take the market next? The answer, of course, is that no one ever knows exactly what the crowd will do or where prices will go in the future. But there are some ways to gain some insights into what the crowd may be thinking and how they might respond to developments based on how human beings have acted in similar situations in the past.

The price chart itself is probably the biggest source of clues as prices leave their tracks in patterns that technical analysts try to interpret to get a view of potential future price action. But a chart is not the only tool traders can consult to analyze the crowd’s reactions and market directions.

This e-book looks at various means that analysts use to get a reading on what the trading crowd is thinking and where it may take prices.