Mike Perras'  Instablog

Day Trader Tools - Following The Herd

I know, you'll never be following the herd, you're a free spirit and a completely independent thinker. Well you know what, we all think that way. But sometimes following the herd, for the right reasons, just makes sense.

Here, let me give you a great example that resonates well for all day traders.

Yesterday (July 13, 2009) Evolving Gold Corp (EVG.V) a Canadian junior mining company, released very positive news after the bell. Today the stock is trading 15 million shares versus the regular few hundred thousand shares per day. Mid morning today the stock is up 42%. The so-called "herd" is day trading like crazy and making some serious cash too. It's always easier to make money when a stock is very liquid and trading heavily. 

It opened at .58, up from the previous close of .45, it spiked to .68 mid morning and pulled back to .58 and then flew again to .95 and closed at .84 . Here's what this "herd" day trader was doing .. buying the mid morning pullback at .62 and then selling into heavy volume at .88 for a very cool 42%.

Evolving Gold Corporation is a great example of what the day trader calls home. He or she speculates on the junior plays and in today's case, was very well rewarded. But let's be clear, the support EVG has had up till now, and the huge trading we saw today, was in fact the day trader at work, not institutional buyers. The markets would fall deafly quiet without the support it receives every day, from you and I, the day trader herd.

And you know, when it comes to day trading tools, following the herd can be very profitable. You just need to know "how to" play. Only buy the pullbacks and you'll always live to play another game down the road.

Ok, so the real question here is where can I find this herd anyway? Personally, I always use the Stock Research Portal. They are focused on the sectors I'm most interested in anyway, the mining, oil and gas sectors. It's a highly organized site, not a message board site filled with rumours, distortion and distraction.

Right on the front page of their website they have something called "Companies Most Alerted, by Subscribers". That simply means they are sharing what stocks people search most on their website. In essence, you get a birds eye view of where the "herds" are gathering, and what stocks they are looking at. This is a fabulous tool, and the fastest way to know where the action is, because it's driven by other traders just like you and I.

You can join the Stock Research Portal for free, in exchange for your email address. Well sir, this day trader is happy to give them his email address in exchange for all the great free resources they provide.

So remember, as far as day trader tools go, following the herd, done smartly, can allow you take part in some very profitable stock plays.

About The Author: Mike Perras is a former media executive and faculty of business professor. Today he manages the Canadian Stock Alerts blog It is updated weekdays in real time, and the primary focus is to find stocks with higher than usual trading volume. Mr. Perras doesn't advocate buying the stocks he mentions. Nothing in this article is either designed to meet readers personal financial situations, or intended or taken to be investment advice.

(Disclosure: No position in Evolving Gold Corp)