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Humans Naturally Follow Crowd Behavior

Great article in the Wall Street Journal by Alison Gopnik titled, “Humans Naturally Follow Crowd Behavior”:

It happened last Sunday at football stadiums around the country. Suddenly, 50,000 individuals became a single unit, almost a single mind, focused intently on what was happening on the field—that particular touchdown grab or dive into the end zone. Somehow, virtually simultaneously, each of those 50,000 people tuned into what the other 49,999 were looking at.

Becoming part of a crowd can be exhilarating or terrifying: The same mechanisms that make people fans can just as easily make them fanatics. And throughout human history we have constructed institutions that provide that dangerous, enthralling thrill. The Coliseum that hosts my local Oakland Raiders is, after all, just a modern knockoff of the massive theater that housed Roman crowds cheering their favorite gladiators 2,000 years ago.

(For Oakland fans, like my family, it’s particularly clear that participating in the Raider Nation is responsible for much of the games’ appeal—it certainly isn’t the generally pathetic football.)

In fact, recent studies suggest that our sensitivity to crowds is built into our perceptual system and operates in a remarkably swift and automatic way. In a 2012 paper in the Proceedings of the National Academy of Sciences, A.C. Gallup, then at Princeton University, and colleagues looked at the crowds that gather in shopping centers and train stations.

In one study, a few ringers simply joined the crowd and stared up at a spot in the sky for 60 seconds. Then the researchers recorded and analyzed the movements of the people around them. The scientists found that within seconds hundreds of people coordinated their attention in a highly systematic way. People consistently stopped to look toward exactly the same spot as the ringers.

The number of ringers ranged from one to 15. People turn out to be very sensitive to how many other people are looking at something, as well as to where they look. Individuals were much more likely to follow the gaze of several people than just a few, so there was a cascade of looking as more people joined in.

In a new study in Psychological Science, Timothy Sweeny at the University of Denver and David Whitney at the University of California, Berkeley, looked at the mechanisms that let us follow a crowd in this way. They showed people a set of four faces, each looking in a slightly different direction. Then the researchers asked people to indicate where the whole group was looking (the observers had to swivel the eyes on a face on a computer screen to match the direction of the group).

Because we combine head and eye direction in calculating a gaze, the participants couldn’t tell where each face was looking by tracking either the eyes or the head alone; they had to combine the two. The subjects saw the faces for less than a quarter of a second. That’s much too short a time to look at each face individually, one by one.

It sounds impossibly hard. If you try the experiment, you can barely be sure of what you saw at all. But in fact, people were amazingly accurate. Somehow, in that split-second, they put all the faces together and worked out the average direction where the whole group was looking.

In other studies, Dr. Whitney has shown that people can swiftly calculate how happy or sad a crowd is in much the same way.

Other social animals have dedicated brain mechanisms for coordinating their action—that’s what’s behind the graceful rhythms of a flock of birds or a school of fish. It may be hard to think of the eccentric, gothic pirates of Oakland’s Raider Nation in the same way. A fan I know says that going to a game is like being plunged into an unusually friendly and cooperative postapocalyptic dystopia—a marijuana-mellowed Mad Max.

But our brains seem built to forge a flock out of even such unlikely materials.

For more see:

Nice perspective.

Finding Opportunity Means Taking Shots: Same for Football, Same for Trend Following

Excerpt from here:

In finding Leach, an alumnus and fellow acolyte of BYU, Mumme stumbled upon the Paul McCartney to his John Lennon. Neither one of them gave a damn about college football’s hallowed traditions. Both cherished the lessons you could learn from heroic iconoclasts like Davy Crockett or Geronimo. And both liked getting in the car, blasting Jimmy Buffett and driving to any football practice in the country where they thought they could snatch up another crazy idea and make it part of their oeuvre.

More:

Well before Gus Malzahn and Chip Kelly were riding their wide splits and hurry-up offenses all the way to the BCS championship game, Mumme and Leach were running the concept on a small practice field in Mount Pleasant, Iowa. “The more shots on goal you get, the better,” Leach says. “That’s how we saw it. And with so many people touching the ball, it elevates the enthusiasm of the whole team.” In their three years at Iowa Wesleyan, the Mumme and Leach show went 25-10 and led the nation in passing once and finished second twice.

“The more shots on goal you get, the better” is the reason why you CAN’T be a trend follower on one market alone. You need opportunity. Trade one market, you are limited to one opportunity. It’s like running the fullback straight ahead for 3 yards every play. Bad strategy. You need diversity in opportunity.

Bruce Lee on Opportunity

Statistics in Football Can Make You See the Innovative Trend Following Light

Consider a story excerpt about “numbers” that might just help you to make more money:

A high school coach in Arkansas has developed a new football strategy: His team never punts. And he always employs the on-side kick. Coach Kevin Kelley developed these tactics from a study of football statistics; though the team often gives up the ball on downs, the increased number of possessions pays off in the long run. The coach has an .833 record since adopting this strategy, and his team has won the state championship three times. This season the team is 10-0.

Keeping the offense on the field on fourth down allows for more creative play-calling. Third-and-long does not have to be a passing down. The Little Rock school can run the ball, throw a screen pass or use any number of formations. Defenses do not know whether to use a nickel or dime defense. And Pulaski’s offense has less pressure on third down.

“We don’t really worry too much about it,” quarterback Spencer Keith said. “We just get as many yards as we can. We don’t have to go for the first down.”

If Pulaski converts on fourth down, it creates a momentum change similar to a turnover. Other high school coaches have told Kelley they would rather see his team punt. The Bruins even avoid punting when the defense has stopped them inside their own 10-yard line.

“You can just tell people are in the stands thinking, ‘You’re an idiot,’” Kelley said. Kelley supports this rationale with numbers analysis.

If Pulaski has a fourth-and-8 at its own 5-yard line, Kelley said his explosive offense likely will convert a first down at least 50 percent of the time. If it fails to convert, statistical data from the college level shows that an opponent acquiring the ball inside the 10-yard line scores a touchdown 90 percent of the time. If Pulaski punts away (i.e., a 40-yard punt with a 10-yard return) the other team will start with the ball on the 38-yard line and score a touchdown 77 percent of the time. The difference is only 13 percent.

An innovative and statistics-minded coach, Kelley had tinkered with eschewing the punting game since winning his first state championship in 2003. He became further emboldened after reading several studies, including “Do Firms Maximize? Evidence from Pro Football,” by University of California-Berkeley economics professor David Romer. Kelley also examined ZEUS, a computer program developed by Chuck Bower, who has a doctorate in astrophysics, and Frank Frigo, a game theory expert, to model and predict football outcomes.

THAT is exactly how trend following approaches making money in the markets. Question the typical ways of investing and put the odds on your side.

The way to a nice life.

Football Out, Nerfball In & Weenies Multiply

A sad excerpt from an article:

They were just informed that during recess, football is out and Nerf ball is in. Hard soccer balls have been banned, along with baseballs and lacrosse balls, rough games of tag, or cartwheels unless supervised by a coach.

First dodge ball and now “catch” is banned.

Soon kids will be wearing helmets to simply walk.

Watch.

It will happen.

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