Throughout my life, I have often felt that it was not good to “follow the herd.” To this day, the idea of not going where the “sheeple” go, and doing what everyone else does, sounds better.
However, there is something to be learned from the sheep herd mentality. In business for example, notice that many successful companies, including ultra successful companies that touch our lives in many ways (Facebook, Amazon, etc), were not the “rebel” companies going in a completely different direction. They took advantage of the rebels to pave the way for them.
For example, in social media, Friendster got people to connect, make friends online, and share information. Myspace got a whole other chunk of people involved so that by the time Facebook hit its stride, people were not uncomfortable sharing profiles, likes etc online.
Amazon was early in the internet, and was somewhat of a rebel. But it took numerous companies trying to sell online and going out of business (remember Pets.com?) to help people work the “it’s ok to buy online” muscle so now most people don’t even think about privacy and financial security when dealing with Amazon. If you can honestly remember back to 1998, many people liked browsing the web but were not going to share their credit card information (much less their bank account data – Hello Paypal) online!
These companies as well as many other “followers” in various businesses, show that following can be successful. It can work that way in stocks. There are many ways to make money in the stock market – some are convinced that we should view charts only; others are convinced that deep fundamental investing is the key. Some try to “buy cheap,” an art others compare to trying to “catch a falling knife” (meaning a falling stock can keep falling!).
What if in the stock market (or in other tradeable markets such as commodities), stocks tend to head in a certain direction and continue in that direction for a period of time. Could you make money following that move, rather than trying to pinpoint its exact start? Many successful market types believe you can.
The amazing thing is, that whether you choose that style or another style of trading, you can be successful (or not!). But in this case, waiting for the herd to go then following after would make for an awful shepherd, but could potentially make a successful trader.