The Edge of the Few: Leveraging Crowd Psychology in Trading
Identifying where the masses are going and positioning yourself strategically in the market
Find the audio version of this post at the bottom.
Working with traders across different markets, styles, and strategies, I've noticed a common factor differentiating successful ones: they think like contrarians.
Being a contrarian in trading manifests in various ways. It starts with choosing a career that defies our natural survival instincts—an achievement in itself. But it doesn't stop there; maintaining a contrarian approach is critical for continually materializing your edge.
What does this mean, exactly?
John Templeton, renowned for his contrarian approach to investing, captured it perfectly when he said:
If you want to have a better performance than the crowd, you must do things differently from the crowd.
Every successful edge (and by "edge," I mean a combination of strategy and trader) has a way of satisfying these two actions:
Identifying the signs of crowd behavior on the charts.
Using that information to inform your trading decisions.
This is what I've observed over the years. But what does this look like in practice?
How can you see beyond the crowd before becoming part of it?
In today's read, we’ll explore the power of spotting the mass psychology behind the candlesticks, allowing you to stay one step ahead of the crowd and capitalize on it.