"Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits - a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."
To put the above in simpler terms, it means that stock markets are driven by an irrational behavior. The impulsiveness of investors to act without calculating the risk and returns, is what is known as the result of "animal spirits" or "herd mentality". Why are stock markets driven so high despite weak evidence of strong economic data? This is due to irrational investors who do not wish to miss the boat.
Circuit Breakers
Similar to soccer betting, do you also have the urge to bet because you are addicted to winning, money or thrill? You need to use what is termed is known as "circuit breakers" in stock exchanges. For example if a stock suddenly falls 10% within a few minutes, trading on the stock will be temporary halted for an hour. This is to curb speculation and to stop fear sentiments.
In the same way, you need to find circuit breakers in your life, whether you are investing in stocks or soccer betting. These circuit breakers are important for you to control your addiction.
Circuit Breakers Suggested:
1. Stop at a certain amount of winnings or losings.
2. Temporary halt all betting activities including analyzing for a period of time.
3. Ask yourself whether you have calculated the risk and returns before placing each bet. You can refer to these articles to shape your calculations:
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