Dave, actually there are two reasons to follow a chat room:
- with that many people watching the news, you will sometimes get a minute or two lead on stocks that are reacting to hot news.
- it can give you an idea where the herd (moooooo!) is going.
It does NOT mean that I forget due diligence! Or, that I listen closely to the front-runners. Or, that I jump into one of these trades when my scanning software has a better possibility.
If someone mentions SPECIFIC news on a stock, I'll quickly check it out and move to QCharts for deeper analysis. If I don't like what I see and read on MY news and MY charts, forget it! If I like it, I may take a chance.
Regarding a herd trade, I sometimes take a contrarian position. If there is a herd trade, many times the herd is late. By the time the the bovines are getting on board, the train is getting ready to move in the opposite direction. If the little heifers are going long, I'll watch of a point of slackening pace (trade rate going down, volume going down) and take a short position. Of course, I'll do some analysis to determine the longer term trend and find out if there are any natural support or resistance points - MA's, Fibo retracements, etc.
For both of these, unless the news is spectacular, I'll expect a quick scalp. I don't expect these will necessarily be high quality trades.
Just some thoughts.
Regards,
Dan. |
