How to Get Ahead of the Investing Crowd BEFORE It Moves
First, identify the trend of investor behavior – here’s how
by Bob Stokes
Updated: April 25, 2019
The stock market is people. Their collective psychology governs prices.
Decades of observation show that this psychology unfolds in recognizable and repetitive patterns.
This repetition allows for high-confidence predictions.
How is this so?
Let's start the explanation with a quote from a classic Elliott Wave Theorist:
Most people get virtually all of their ideas about financial markets from other people, through newspapers, television, tipsters and analysts, without checking a thing. They think, "Who am I to check? These other people are supposed to be experts." The unconscious mind says: You have too little basis upon which to exercise reason; your only alternative is to assume that the herd knows where it is going.
The Elliott wave model is a direct reflection of these recognizable and repetitive herding patterns, as they swing from optimism to pessimism and back in a natural sequence.
Hence, use the Elliott wave method and you can identify the current juncture of the market's chart pattern. In turn, you will have a high-degree of confidence in what to expect next.
We don't claim that the Elliott wave model is a crystal ball. But, in our four decades of stock market observation, we've concluded that it's the most useful method for anticipating trend turns.
Does the Elliott wave model apply to other markets besides stocks?
Well, herding is such an important topic that the new, April Elliott Wave Theorist is entirely devoted to the subject, and here's an excerpt:
Since all financial markets, for the most part, fluctuate according to Elliott waves just as stocks do, something identical must be in charge of each market's fluctuations.
The new Theorist goes on to address the question of whether this "something" is "herding, mood sharing or a combination of the two."
Moreover, you will find insightful discussions on real estate, commodities, precious metals and oil.
Plus, you will learn why the crowd is not wise.
Market observation has shown time and again that the "crowd" is always on the wrong side of major market turns.
The Elliott wave model helps you to anticipate what the crowd will do next. Thus, you can position your portfolio accordingly.
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- 1. Robert Prechter, Author of 16 market-related books, New York Times Best-Selling Author and Editor of Elliott Wave Theorist
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