The bag and psychology
Sometimes in trying to understand all stock movements forget a maximum fundamental: the bag move people with mental outlines some very similar to ours. Even the automatic programs that generate so much volume are based on basic psychological patterns. An example: A year ago, when someone earning about 5% by buying shares in Santander to € 14 had no hurry to sell, saying that "so what am I gonna do with the money?", Was an upward trend calm now if it earns a 5% by buying a few shares of Santander 6 € to be in a hurry to sell, appear to burn. This happens because volatility creates fear and lack of confidence, it does not matter the price, and the action is, in short, is pure psychology.
And is that almost all the great masters of the science of money were unable to become millionaires. I do not mean to get rich selling textbooks, but speculating. To my knowledge, no more than three business days speculators in the economic history:
- Cantillon (http://www.eumed.net/cursecon/economistas/cantillon.htm), who ended up murdered,
- Ricardo (http://es.wikipedia.org/wiki/David_Ricardo), which bet on the victory of Waterloo buying the English public debt, and
- Keynes (http://es.wikipedia.org/wiki/Keynes), who, after a brief stumble, it was rich in the currency market.
Ie, knowledge economy does not turn anyone into an expert in making money.
However, with psychological patterns if you can make money. An example:
Some years ago the brothers Hirsch, one of the best firms on a global search for seasonal patterns, published a few details: that the days of the week are not all equal to the hours of trading. The Dow Jones from 1990 to 2006, if you look through days of the week would have given the following records:
- 6460 points Monday.
- +1615 Tuesday.
- +204 Wednesday.
- -226 Points Thursday.
- -523 Points Friday.
I am not a psychologist but these data are truly amazing and I can think of two interpretations: the beginning of the week makes us more willing to invest and to action that is approaching the end of the week we wanted and we spend more on Rest and also to open markets and give us a quiet activity that does not give us the weekend. I think that even if markets do not close this schedule will never disappear.
So chalk up the meantime, trading for short it is best to buy and sell Friday at the close on Monday. However, if during the weekend unleashes a world war ... care.
You see? I also have this psychological pattern in mind.
Another example:
Morningstar commissioned a few years ago to teachers Bernatzi, Kahneman and Thaler to conduct a survey to determine the extent to which U.S. investors were subject to the problem of over-optimism. The study was done in 1999 just before the outbreak of the bubble and the question was simple:
When you pose a financial investment Spending more time thinking about the benefits that could gain or losses that might cause?
The responses were the most impactful, both appearing in some psychology books:
- 39% said it spent much more time, almost all the time, thinking about what was going to win.
- 35% passing more time thinking about what was going to win.
- 19%, did the right thing, that is, spend the same time valuing the gain or loss.
- Only 6% said it spent more time assessing the loss.
- 1% said that almost all the time spent evaluating the potential loss.
I think the results are for all of us to ponder. 74% of those entering the market does so because it believes it will win a lot and does not adequately assess risk. Only 7 percent were very concerned for the losses. 74% vs. 7%! and a paltry 1 percent of people who are concerned about extreme form for the losses compared to 39% who cares only about what is going to win. That is why the excessive optimism is so serious ...
And now we return to our own mental patterns: Is it not true that if you buy something and get in because we secure the gain but we have not sold and if we buy low and as we recover our level we are keen to sell at the same price as before seduced us to buy? The share and the price is the same, only our perception has changed.
I think I exciting, there are serious studies have found that even the relationship between sunny days and increases in bag! All this shows that the stock market is not an entelechy that handle some characters inaccessible with superior intelligence, is something as human as any other activity, and sometimes their impulses are so irrational because they are a true reflection of ourselves and our mindset.
In fact, there are a number of terms of psychology own more than economics that explains very well this stock structure and is very well appreciated in this chart that could, at least in its first-half overlap to the chart of the stock market last year and that marks the point of maximum financial risk as opposed to the point of better investment opportunity:
Optimism, enthusiasm, excitement, I am ready, euphoria, anxiety, denial, fear, desperation, panic, capitulation, despair, depression, hope, relief, optimism.
Now there are so many looking for the floor of the bearish market may be forgetting the "setbacks Fibonacci" or Elliot waves and look for diving in their own feelings ...
(268 votes, average: 4.35 out of 5) 
Loading ... Droblo written by the November 19, 2008 with 276 points.
# 1, Carlos Lopez
Summary: press
- The Spanish GDP fell for the first time in 15 years (-0.2%) and 145,700 lost jobs in one year
- SOS from the U.S. automobile: 25,000 million, or receive or is bankrupt
- The growth of bad debt in the banking slows in September
- A little help: investors in real estate will not pay taxes
- BBVA conducts the largest securitization of Spain by 8500 million
- The deceptions that adversely affect the stock market is punishable by imprisonment
- Labor is considering removing from the list of unemployment for those affected by temporary EREs to disguise the figures
- Merrill Lynch: European real estate need 21,500 million
- The prosecutor of New York proposes to suspend the bonus of bankers