Category: Money tips Release Date: 2006-09-22
Soros Investment Tip of the 9: to explore the market overreaction
Soros Investment Theory of the important practical value lies in its use of the theory of reflexivity, to discover a market overreaction to track market trends in the formation, by the self-propelling towards strengthening the final decay process and found that it is precisely a turning point in the best interests of available investment opportunities.
Overreaction of the market, its formation was mainly due to the flow formed by those who follow the trend of moving to the mainstream prejudices formed on the market, driven to follow suit the action has a certain blindness, but also make their own tendency for the market. Due to market factors are very complex uncertainties more drift with the current trends in the market the more people, this homeopathic operations impact on the greater the speculation, this effect itself has become a fundamental factor in the impact of market movements 1, the wind to help the fire, the market is exaggerated prejudice investors about the interaction between the two investors were caught in a blind frenzy mood, and the trend is stronger, the farther bias deviation from the truth, actually makes the market has become more come closer vulnerable. Overreaction of the market, the final result is the rise and fall phenomenon.
In accordance with Soros's theory, the phenomenon of rise and fall of the main sequence features are:
1, the market trend has not yet been identified
2, once the trend has been found, this finding will strengthen the trend of development and lead to a self-propelled beginning of the process.
With the current trends and the current deflection ideas and promote each other, prejudice is increasingly exaggerated. When this process of development to a certain stage, the conditions for a very unbalanced state shall mature.
3, the market direction can be successfully tested: market trends and market participants are available through a variety of external bias
Industry shocks over and over again be tested.
4, convinced that increase in the number: If the bias and trends can remain the same after experiencing a variety of shocks, then with the Solow
Sri Lanka's words, it can not be shaken. At this stage to speed up the process.
5, the real break with the idea: The emergence of this phase marks the chasm between belief and reality is so great, the Urban
Market participants have been obvious bias, this time approaching a climax.
6, finally, a specular reflection type, the process of self-propelled in the opposite direction took place. At this point, right
View of the market will no longer play a catalytic role, the original trend of stagnation, another voice began to affect the market, the original started to lose confidence in the market, when the market started to convert in the opposite direction, the changeover point is called the cross * point. Acceleration stage for the collapse.
Rise and Fall of the financial market phenomena occur, especially for agricultural products market, due to seasonal characteristics, fluctuations in short-cycle and seasonal factors, a greater impact on the market. But while one of them vulnerable to excessive speculation in fundamental factors, the market showed a fever pitch with frequent, such as the formation continued to rise or fall, the callback time and space is rather limited, this is often easily lead to ups and downs Quotes occurrence ( the market. For the metals market, due to its cycle more closely linked with the macro-economic environment, so a relatively long period compared with markets for agricultural products, its turning point in the confirmation should be with caution. improper operation will be a trend of self-propelled submerged.
That is the key to success is to understand the investment market began the development momentum of its own driving force produced a moment. Once confirmed at this critical moment, investors will be able insight into the phenomenon of a rise and fall is starting or is already under way. The operation was found shortly after the turning point, after all, may be expressed as a contrarian, so set a good stop, timely adjustment of strategy is very necessary.
