Popular Stock Market Myths

The stock market is a culture based partly on persistent myths. To a large extent, belief in myths is wishful thinking and, in some cases, magical thinking. This is a belief in something that simply does not make sense. For example, if you believe that watching a baseball game while wearing the team hat or a 'lucky' shirt leads to victory, this is magical thinking.

Key Point

The stock market has many myths, and a large number of investors and traders believe them, even though they are not true.

Magical thinking is quite common.
It is an attempt to find a correlation between acts (wearing a lucky shirt, for example) or rituals (sitting in a lucky chair) and outcomes (a win for your team or profit in your stock). The other side of superstition in magical thinking is the fear that saying a particular thing or doing something causes bad luck or a bad outcome. Actors claim that saying 'good luck' to someone is actually bad luck, preferring 'break a leg' as an opposite form of good wishes. Actors also believe they should never whistle backstage or say 'Macbeth.' These are forms of acts or utterances that are believed to bring about a bad outcome. In the stock market, many investors and traders hold similar beliefs even though they are not always entirely aware of them. Belief in odd timing systems is one example. Some believe that outcomes of the Super Bowl, weather patterns, or even the width of tree rings determine stock market performance—rather than economic trends and the influence of supply and demand.

In the volatile and fast-moving modern stock market, techniques of trading, breadth of markets, costs of trading, and availability of research have all made everything much faster, more efficient, and immediate. However, some popular myths persist. These include:
By Michael C. Thomsett
Michael Thomsett is a British-born American author who has written over 75 books covering investing, business and real estate topics.

Copyrighted 2020. Content published with author's permission.

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