Business Report: The mindset of stock traders - Hawaii News Now - KGMB and KHNL

Business Report: The mindset of stock traders

HONOLULU (HawaiiNewsNow) -

Last week's Shanghai stock market crash tells a lot about the mindset of stock traders. On two separate days stocks dove 7% until a circuit-breaker system halted the trading. The second time, it happened less than half an hour into the trading session, which never resumed.

But this is the interesting part.

What officials did to stop the dive was disable the circuit-breaker. Once traders knew there was nothing to stop trading, they stopped panicking. They had been selling for fear that they were lose big if they didn't. It's a reminder of the crazy way stock traders think. They don't decide whether they want to buy or sell. What they do is to guess what others will do, and then they try to do it first.

This is also what computer trading programs mostly do.

The most fearsome things that happen on world markets are driven by psychology more than arithmetic.

Copyright 2016.  Hawaii News Now.  All Rights Reserved.

Powered by Frankly