Re:China stock trading halted early after 7% plunge again
by ChuckMcM on Wednesday January 06, 2016 @11:57PM
(#10856076)
Panic spreads faster than exuberance.
When you look at the history of commodities and equities trading you will see that a big chunk of the market can be held by people who don't feel they have enough visibility to understand why something is going down, and so when it goes down in an uncharacteristic way, they panic and join in the selling and that grows quickly. The "down" side is that people lose money from panic. But if the market goes up quickly people generally hold on to their stock waiting for it to go up still more, so there is no need to slow trading, it slows itself.
The apocryphal saying “financial markets are driven by two powerful emotions – greed and fear.” is fairly simple but it does capture the essence of the primary movers.
When you look at the history of commodities and equities trading you will see that a big chunk of the market can be held by people who don't feel they have enough visibility to understand why something is going down, and so when it goes down in an uncharacteristic way, they panic and join in the selling and that grows quickly. The "down" side is that people lose money from panic. But if the market goes up quickly people generally hold on to their stock waiting for it to go up still more, so there is no need to slow trading, it slows itself.
The apocryphal saying “financial markets are driven by two powerful emotions – greed and fear.” is fairly simple but it does capture the essence of the primary movers.