Monday, 29 March 2010

Selling Hysteria

For the most part, it is in short-term trades that prices are driven by emotion.  Mid-term and long-term investments are usually influenced more by the fundamentals.

Bubbles burst in the wake of hysteria, while plummeting prices usually end in panic.

You can see panic in falling prices when you see them collapsing straight down day after day for extended periods.  Historically, long periods of selling have ended in "selling climaxes" when everyone finally panics and dumps to get out of the market at any price no matter what the fundamental reality might be.

Large price declines across the board should attract your attention.  A good rule of thumb is to sell during times of market hysteria and buy during times of panic.  

Always remember to buy low and sell high.  It sounds so simple, but it is extremely difficult.  Just keep this dictum in mind always - especially when your emotions are getting the best of you.

Jim Rogers
A Gift to My Children

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