Group Think, from Jim Sogi

June 21, 2011 |

 Most people love to think and act alike. It starts in infancy when you mimic your parents or siblings. Teens are notorious for talking, dressing, acting, and thinking alike, and many dangers arise for them as a result. Young adults I notice tend to dress alike and sport similar hairdos. In Japan, consensus is a compulsion.

In trading it has been common recently to see everyone piling on in the same direction during the day. The internals confirm this. Big players seem to like to wait to see which direction the day is going and all pile in the same direction. Are we much more than fish? Apparently not. There doesn't seem to be much science, analysis or thinking going on in the market recently, nor in the news coverage. It looks like group think. The problem is it's hard going against, in life and in markets. However when used as strategy it's productive, but when used for misdirected frustrations, its not.


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