Confidence leads to trades. If you think you are endowed with a superhuman ability to forecast stock prices, you will most likely want to monetize your talent through picking stocks, timing the market or using charts to divine where stock prices are heading. While some investors do seem to have this gift, research conclusively shows that the vast majority of us sadly do not. So why do so many ordinary folks persist in thinking that they can pick stocks or predict stock market patterns?
As I briefly explained in my previous blogs, it is human nature to want to predict partly because we hate ambiguities and crave for certainty. The urge to sieve out patterns probably has to do with the size of our brains. The fact that we have the largest cerebral cortex among all mammals keeps our ‘smart’ brains busy looking for systematic patterns to exploit. Used in the
...