Trade Ahead of the Crowd

Most traders wait for confirmation signals before entering the market, long or short, but that's a risky strategy in a modern environment where whipsaws and fakeouts are the rule of the day. Learning to anticipate price movement gets us into the action much earlier than our competition, and we can then use the reactionary crowd to our advantage.

Of course, this strategy sounds easier than it is in real-time practice, because we're social creatures looking for other warm bodies before we assume risk. In other words, most of us don't feel secure entering the market until the time and sales ticker, the level II screen, and a fast-moving stock tell us the coast is clear.

What do I mean by confirmation? Market players get fixated on the charts, waiting to see how everyone else reacts at key price points before they're willing to assume risk. However, it's often too late to act by the time they observe the movement and volume that confirms the breakout or breakdown they want to trade. ...