When To Jump On The Stock Bandwagon

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Imagine for a second that the stock market is like a bandwagon.

There is music playing and everyone on board seems to be having a great time. There are cheers, laughter and fun had by all on board.

As the bandwagon rolls down the street onlookers start to jump on. A few early passengers start to get off, partied out and happy, which makes more room for new people looking to get into the fun. The bandwagon charges forward.

More and more people  are lured by the great time everyone on board is having and clamor to get on board. With all the new people on board the bandwagon is having a tough time keeping up its speed. The bandwagon begins to slow.

More partiers jump on board, everyone wants to participate in this great time. Everyone wants a turn. Finally so many people are on the bandwagon that it comes to a stop.

This makes it very easy for the last big rush of onlookers to jump on the wagon looking for that great ride.

Now the bandwagon is not used to being so heavy it can not move. It must figure out how to get back to its natural state of moving forward. It must shake itself of this heavy load of party goers.

The bandwagon shifts into reverse and jolts backwards knocking a few people off. The cheering stops. Again, another move backwards. More people fall off. People are confused. Where is the music? Where are my free drinks? Before anyone has a chance to figure it out the bandwagon, lurches backwards again. Now there is a full out panic and everyone jumps or gets knocked off.

The bandwagon is now standing still and getting ready to move forward again.

At this point, the first group that got off, knowing that they got the party started the first time all jump on board. This group of party goers understands that the bandwagon moves best when it is not burdened with the large crowd. The music gets cranked up again and they are laughing and having a great time. The Bandwagon is rolling again.

Soon, those that got thrown off in the panic ,are noticing what a great time everyone is having as the bandwagon rolls by. They start chasing the bandwagon down the street begging to get on board. Once again, this never ending cycle begins.

So what is the point of this story? The Pro Trader will wait for the right time to jump on the bandwagon. The pro trader wants to be on board early to take part in the fun. We want to be on board ahead of the newbies that will flock to the party driving forward for a short time. The Pro trader then takes his profits, gets off and waits for the cycle to begin again.

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