Thinking rationally amid an irrational world often simply does not work. Why? That thinking is irrational in and of itself. Your calculated actions are based on your own rational view of the irrational world. Say what?
You assume that others think likewise, but they do not. Therefore your actions and reactions are based on falsehoods. On the whole, people are like stupid animals. They are like blind sheep or goats following one another.
The best example I know of rational and logical thinking going awry is the Unites States' Stock Markets. How, you may say? Please read on.
Every single stock represented on American Stock Markets has underlying characteristics, data, facts, figures, and an historical background and record. People all view the same info about each stock (except for those privy insider info) and anything more than a few hours old is history.
What happens is that novice traders or investors (80% of people) look at these stock charts and information flows and see stocks here and there that look great. They then base their decisions on what they see, not understanding that everyone else has already seen it also (especially the movers and shakers).
While in the long-run the past may well be the best indicator to the future, this is in no way true of the present or even the mid-term time frame. The novice then makes trades based on "what should be," based solely upon the great numbers!
So, what is the answer to this ongoing and ever-present dilemma? To know people in general, and how they think and will act, is they key. But, how?
Wall Street and Main Street traders on computers have their fancy Ivy League Degrees in Economics and Business and Industry and Statistics, and think they know business and companies inside and out. Guess what? They might. The problem is that it matters very little either way.
Remember, rational and logical thinking does not always pay-off, all else being equal. It is far more important to know people, human nature, and the herd mentality than about the individual stocks and companies they are trading.
Give me a person with a great Psychology/Sociology background and limited Business Knowledge - and I will show you a potentially great stock trader. All the Business Education on earth is useless without understanding the people that are trading the stocks and moving the markets. Understand?
When we humans focus on the wrong thing or things, all the rationality and logic on Earth is wrong or useless. Know what to study and react to in all situations, not just the Stock Markets. We should let the Markets teach us all about Life and Logic...
~ Jimmy Hall owns and operates Jimmy Hall Writing Services/Atlanta and Online (404-580-1501), and writes business plans, press releases, letters, resumes, web content, and more....
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