10 Sep 2026 - The Crowd Is Always Right... Until It Isn't

In June, the Kospi peaked above 9,300 points. It had risen 76% in 2025. It then doubled again in the first half of this year. Retail investors piled in. Leveraged single-stock ETFs on Samsung and SK Hynix launched in late May, letting them magnify their bets.

Then July happened. The Kospi fell 22%. It was the index's worst month since the Global Financial Crisis. Investors who bought the leveraged ETFs near the top and held to mid-July lost about half their money.

It is tempting to read this as a story about Korean retail investors and single-stock leverage. It isn't. It is a story about human behaviour, and it repeats in market after market, time after time.

The pull of the crowd

Herding is not a story about poor judgement. It is a story about a very human need for safety, playing out in markets.

Devenow and Welch's 1996 review of the herding literature sets out two distinct versions of the same behaviour. The first is rational herding, where investors copy others because they assume the crowd has information they don't. Each new buyer adds a little more apparent confirmation, and the move builds on itself rather than on fresh evidence. The second is irrational herding, where investors follow the crowd simply because it feels safer, independent of any information content at all.

Both versions are underpinned by the same need: safety in numbers. Being wrong alongside everyone else feels different to being wrong alone, whether or not there's a good reason for the crowd to be right. The problem is that this feeling of safety and the actual level of risk move in opposite directions. The more crowded the trade becomes, the more comfortable it feels, and the more fragile it actually is.

Two versions of the same pattern

The Kospi shows the sharp version. A fast, leveraged, retail-driven move that unwound just as quickly. FOMO plus leverage plus a crowded trade is a well-worn combination, and it tends to end the same way.

Precious metals show the slower version. Gold and silver's move over 2024 and 2025 was driven by real forces: central bank buying, rate expectations, currency dynamics. But the story around the move was also self-reinforcing. Rising prices attract new buyers, media coverage amplifies the narrative, and at some point the narrative itself becomes a reason to buy, separate from the fundamentals that started it. This is a genuine multi-year trend, not a single blow-off. That is precisely why it is a better test of discipline than a bubble is. Staying in a strong trend is not the mistake. Staying in without any plan for managing the position is.

Where trend following fits

Trend following is a way to trade that behaviour rather than get caught in it. Price sets the entry and the exit. That's what makes it possible to be in a crowded trade without being trapped by it.

Trend following looks for trends early, often before they're conspicuous, and stays with them as the crowd arrives. The Kospi's move and the precious metals run are both trades our systematic models identified before either became a mainstream story.

Herding is fuel. The buying that pushes a trend from early to obvious, and then from obvious to crowded, is exactly what a trend-following strategy is designed to capture.

Systematic trend following sizes positions based on volatility, not conviction. When its indicators show the trend is no longer there, it exits. There's no leverage stacked on top of an already extended move. A system does not need to keep believing in a story to justify staying in.

It also has no memory of its own trades. It doesn't hold on because admitting the trend has turned feels like admitting a mistake. A system has no ego invested in being right, so it has no reason to ignore what the price is doing.

That is the real distinction. Not whether to participate in a trend, but how early the position was built, and how quickly it is closed once the trend ends.

The Kospi and precious metals weren't failures of the crowd, or of the trend. Herding will keep shaping markets. What matters is having a process for participating in it.