Question 2: What does the greater fool theory mean?
In the capital market (such as stock market and futures market), there will be other fools who are willing to buy at a higher price. This operation strategy is usually called fool wins fool by the market, so it can only be applied when the stock market rises. Theoretically speaking, Bo silly also has its reasonable side. Bossy's strategy is that there is a high price above the high price and a low price below the low price. Its rules of the game are like a baton. As long as it is not the last one, it will be profitable. Long-term profit, short-term loss reduction. Only those who receive the last stick will be unlucky.
The "bigger fool theory" wants to reveal the motivation behind speculation, and the key to speculation is to judge whether there is a bigger fool than yourself. As long as he is not the biggest fool, he must be the winner, just a matter of winning more and losing less. If there is no bigger idiot who is willing to be your "next home" at a higher price, then you will become the biggest idiot. It can be said that any speculator believes nothing more than the "biggest fool" theory.
In the theory of analyzing the stock market from the perspective of popular psychology, the "greater fool theory" has been widely known. According to this theory, some investors in the stock market simply don't care about the theoretical price and intrinsic value of the stock. They buy stocks only because they believe that more stupid people will take over the "hot potato" from them at a higher price in the future. The basis of supporting Bo Silly is that the investment public's judgment on the future is inconsistent and out of sync. For any local or overall news, there are always people who are too optimistic, and there are always people who tend to be pessimistic. Some people act too early, while others act slowly. The difference of these judgments leads to the difference of overall behavior, stimulates the incentive system of the market itself, and leads to the emergence of the phenomenon of stupidity. This is also quite obvious in the China stock market.
There are two kinds of stupid behavior, one is emotional stupidity, and the other is rational stupidity. The former, when acting, did not know that he had entered a stupid game, nor did he know the rules and inevitable results of the game. The latter, who clearly knows Bos and related rules, only believes that more and more stupid investors are about to intervene in the current situation, so they invest a small amount of money in gambling.
The premise that rational fools can make a profit is that more fools take over, which is the judgment of public psychology. When the investing public generally feels that the current price is already high and needs to be evacuated, the real high point of the market will really come. "Stupidity is not the stupidest thing" is simple to say, but not easy to do, because it is not easy to judge whether there are more and more stupid people. If you are not careful, a rational fool can easily become the stupidest. Who wants him to join the stupid candidate team? Therefore, if you want to participate in Bosha, you must fully study and analyze the mass psychology of the market and control the psychological state.
Buffett's famous saying is "invest with your brain, not your glands". What the brain should do is to judge the future management of the enterprise and the psychological trend of the public, while the gland will only make people do things according to instinct. Buffett is Graham's student and Graham is Dow's disciple. Buffett is not 100% against market speculation, but he will never take off his existing shoes until he finds better shoes. Therefore, it is not the most reasonable reason to completely give up stupid phenomena. At the level you can control, maintaining a certain degree of rational stupidity can be used as an investment strategy in an irrational market.
In Shenzhen and Shanghai stock markets, speculative atmosphere always exists more or less, and quite a few speculators are irrational and sometimes even gamble wildly. For amateur investors, it is not easy to grasp the benefits brought by this stupidity, but for professional investors, it is necessary to make full use of this market atmosphere and put a certain proportion of funds into rational stupidity.
Stupid behavior is often aggravated by news factors. For example, a strong stock is rising day by day, and its P/E ratio is getting higher and higher, which is obviously unreasonable, and there is no news that the stock is beneficial to many news. The stock price just keeps going up, which makes the traders who haven't bought it at the low position itch, so they buy it at a high price. The pursuit of empty runners will lead to a further rise in the stock price, and the more they buy, the more people buy it. Not long after, it is strange that the market will naturally have a lot of good rumors about the stock, and the unreasonable rise has also become a justified rise. Therefore, market participants often think that it is the trend that determines the news rather than the news. Stocks with good trends will attract buying and good news. Therefore, people who choose the Bo silly strategy do not need to seriously study the fundamentals of individual stocks. The only thing they need to pay attention to is the trend of stock price and the cooperation of volume. Chasing up and killing down is vividly reflected in this action. Strictly speaking, the core of the big fool theory is "following the trend". How to grasp the relationship between "following the trend" and reverse thinking will be discussed more later.
Buying at a high price and selling at a low price is a taboo in stock market operation, but some people can sell at a higher price by chasing goods at a high price; If it is sold at a low price, it can be made up at a lower price. Of course, this is not a bad thing. Perhaps it is just the sentence "artists are bold and bolder." Many times, the market can't be speculated by simple value theory. When people are enthusiastic, rational value evaluation often fails. At this time, we need to think about the problem from the perspective of public psychology, and judge whether the most dangerous time in the market has come quietly according to the "smell" of market sentiment.