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Stop Looking for Answers- The Market Doesn’t Have to be Rational

In the 1970s, a Harvard psychologist conducted an experiment. She went to a library and approached a photocopier where a line was being formed. She walked up to the first person in line and said: “Excuse me, I have five pages. May I use the machine?” Her success rate was 60 percent. She then repeated the experiment, this time by saying, “Excuse me, I have five pages. May I use the machine because I’m in a rush?”. In this case, her success rate was 94 percent. One could say this is understandable as people were sympathetic to someone in a rush. She then tried one more experiment, this time saying, “Excuse me, I have 5 pages. May I go before you because I have to make some copies?”. The result was still an astounding 93 percent success rate! Even though all people in line were there for the same reason (making copies), she was able to justify her behavior with the simple word of “because”. It didn’t matter if the excuse was good or not.  People tend to become more forgiving and understanding if they have a reason.

If the market rises or falls by 30 pips, you will never find the true cause from so called market experts. The simple reason for a movement of this size is purely white noise, the combination of an infinite number of market movements. Unfortunately, most people won’t accept this and look for real palpable reasons and the “experts” are happy to provide one. Whatever reason they provide will be meaningless- fears of a trade war, speculation of a fed rate hike etc.

Market movements don’t need to be justified. Sometimes prices move “just because…”.

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