Use "Herding" to Your Advantage - Investing Shortcuts

Use “Herding” to Your Advantage

By September 15, 2016Trading
Use "Herding" to Your Advantage

Emotionally driven decisions almost always result in the wrong action at the wrong time.

However, traders who understand the underlying “why” causing the crowd to become emotional (and are on alert for the regular movements that “herding” causes) can optimize their entries and exits by acting when conditions are most favorable.

One of the components I use in my Decision Support Engine (or model) is the standard deviation band (sdb). I program my DSE to seek markets where, at some degree of a trend (weekly, daily, intraday bars), herding has taken the trend to either manic (overbought) or depressive (oversold) extremes.

TLT Daily Bar Chart

Above is the daily bar chart of TLT, the tracking stock for the 20-year Treasury Bond. When the DSE model finds a trend that is so mature that price is testing the 2 sdb (olive/gold line), which controls 95% of normality, it goes on “yellow alert” for an upcoming manic extreme in the herd’s “certainty” that prices can only rise.

Then it waits for price to move to the 3 sdb (orange line), which controls 99.7% of normality, where it goes on “red alert” for an imminent manic extreme. At that point, I exit long exposure and/or use trailing sell stops to protect profits/limit losses, and/or establish short exposure.

To find out how to optimize entry/exit timing even further, click here.

Ken Goldberg

Author Ken Goldberg

Ken Goldberg is a Registered Investment Adviser, a member of the Market Technicians Association, and President and Chief Market Strategist at Trading With Waves, Inc. He specializes in educating traders on Elliott Wave and Fibonacci predictive market theories. Over the last 30 years, he has released three video courses on decision support models and has trained more than 800 day-traders and investors. Ken writes a column for, which has appeared on CNBC’s Power Lunch. In 2007 he won the World Cup Championship of CME Group® E-mini Index Trading (third quarter), and Ken is currently a featured Advisor and lead trader on, where subscribers can sign up to make the same trades he makes in his personal account.

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