When making decisions, our confidence and emotions also play a role in strengthening and influencing.
The degree of information processing can effectively solve our unknowns, so the more information we have, the better decisions we will make. But we must understand the fact that the information of things will appear constantly in the development, or even explode, so the information is incomplete for us, that is to say, our rationality in mastering our own information is limited. At the same time, everyone's mastery of information is completely different, and different people's understanding of information is also biased. In other words, for different decision makers, information is asymmetric.
Our expectations are developed on the basis of information, so we must understand the importance of information to us when studying expectations. At the same time, we should know the incompleteness of information. Knowing the two characteristics of information is the premise of knowing that our expectations are not necessarily correct. So it is always possible to expect inaccuracies.
This paper discusses the development and application of expectation theory in futures market, so the main problem lies in the combination of expectation theory and futures market.
Expectation theory has gone through three stages, namely, extrapolation expectation theory, adaptive expectation theory and rational expectation theory. These three stages have different performance characteristics in China's futures market. First of all, we should explain the expectation theory of extrapolation a little. The theory of extrapolating expectations is simply to infer how the future situation will develop according to past experience, and then form expectations. A key feature of the theory of extrapolating expectations is that we attach importance to recent experience rather than long-term experience. A notable feature, for example, after the daily limit of corn, we naturally infer that it will rise in the near future, and we naturally expect the price to continue to rise in the near future, but due to our extrapolation, we expect that the theory will only be applied to short-term practical experience most of the time. If we don't pay special attention to long-term information and experience, systematic mistakes may occur. For example, during the recent price increase of Douyi 805, 1 1.20 suddenly fell, so if it is a short-term overnight order in the operation process, it may bring disastrous consequences to individual retail investors. I lost nearly half my wealth in the futures market.
In this way, in order to prevent such systematic consequences, our expectation theory has been further developed and the adaptive expectation theory has been developed. In other words, once our expectations and reality are wrong, we must revise our expectations to make them conform to reality. Take the futures market as an example. For example, our trading system consists of a five-week moving average and a five-week moving average. The 5-week moving average represents our current expectations, and the 5-week moving average represents the actual price response to expectations.
The price is above the 5-week moving average, indicating that the market supports our expectation of rising. When the price falls below the 5-week moving average and is between the 5-week moving average, it shows that the market is still supporting our rising expectations, but the expectations are not so strong. At this time, we need to adjust our expectations. Adjust the current expectation with the price adjustment, and determine the long-term price expectation as the rising expectation. The tool to adjust our expectations is position control. For example, if the price is more than 5 days and 5 weeks, our position is 50%. When the current 5-day moving average is above the 5-week moving average, we can become a 20% position.
It can be said that adaptive expectations Theory is not widely used in the futures market. Why does the price fluctuate violently when it falls below the 5-day moving average? When the time-sharing chart falls below the moving average, the general speculative varieties will fluctuate violently, which can be said to have a lot to do with the conscious and unconscious application of adaptive expectations Theory in the futures market.
When the capital capacity of individual investors in the market is small, we can gain more freedom and liquidity from it. In this case, we can extrapolate and use adaptive methods to form expectations, so as to effectively earn enough profits from the market, but it will obviously require rational expectations to make decisions. The futures market is a zero-sum game, so generally speaking, the main players can make enough profits in the end. Tracking the main force is tracking the winner and also tracking rationality. This is why many people can be confused by the big orders and positions on the disk. The main force is not so easy to track because people's consciousness and behavior are constantly changing.
Rational expectation tells us how a rational investor should form rational expectation, but it has natural defects. Our information is incomplete, and our individuals are limited, so we can't get all possible information, and we will always get closer and closer to rationality.
The future is uncertain, and the future always determines the fact that it has become in the process of development, and the reality and the future are constantly changing in such development. But we can form our own expectations according to the existing information and some possible information in the future, so as to make decision-making behavior. When our expectations and decision-making behaviors are in line with the facts of our future development, then we will get enough profits. But we should understand that our expectations, whether formed by extrapolation or rational expectations, may be wrong. Because there are countless possibilities in the future, and there is only one future that can finally become a reality.
Our expectations are always wrong, so we need to stop loss and protect the principal, so that we can still make enough profits when we have enough information and strong confidence to support our expectations next time. Expectation theory also emphasizes the necessity and internal principle of stop loss.