Gauging the Crowd

What was it about winning?

Someone did observe, that 12% of market players win in Equity markets.

In Forex, the number is much lower, something like 5%, I believe. 

If these numbers are to be believed, what’s the obvious takeaway for us?

Behaving like the crowd will not make us…

…win.

Or, in other words, to win, we need to behave in a manner which is not exhibited by the crowd. 

This makes us gauge crowd behaviour…

…almost all the time. 

For example, what does everyone want to do just now?

What did everyone want to do in March?

Did we do the opposite?

If so, we are winning now.

It’s not that one can switch one’s buttons just like that.

It takes experience, solid research, conviction and will-power to go against normal market behaviour.

It doesn’t just come. 

One works towards it, and the only learning comes from mistakes made with one’s money on the line.

That’s the price of tuition in the markets. Unfortunately, books probably won’t teach you this one.

Those who don’t pay this tution-price early, when their ticket-size is still small, well, they can eventually end up doing so later, at a much larger ticket-size.

Just make your mistakes, as many as you can, as early as possible. 

Don’t repeat a mistake.

Great. You’re done already!

How does one gauge the crowd?

Let’s listen in. What are people saying? How many tips are circulating? What’s the quality of these tips? What’s the level of enthusiasm? Is the doorman talking stocks? Folks going all-in at the top?

Or, does no one want to have to do anything with the market? Are you getting calls asking whether one should stop one’s SIP? Is your close relative aghast that you have your money in stocks? Is he or she alerting you to the possibility of an absurd-looking bottom?

The human being is an emotional entity. Blessed be us Indians, we take the cake in being emotional. Not for nothing are our markets correspondingly volatile. And that’s great news for Equity players.

Why?

You’ll see wild swings in the playing fields.

Our indices roller-coast hugely, perhaps the most in the investable world.

We get fantastic bottoms to enter…

…and amazing tops to exit.

Question is, do we leave ourselves in a position to take advantage of this?

Are we continuously gauging the crowd?

Are we continuously behaving like the crowd?

Or, have we made it a habit…

…to win?

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