“Buy low, sell high.” Everyone says it. No one does it.
Why?
Check out this excerpt from Robert Prechter’s The Socionomic Theory of Finance:
In economics, over the long run, the motivation to buy goods and services moves in the opposite direction from price, whereas in finance, the motivation to buy and the desire to own investment items always moves in the same direction as price:
Unlike economic goods and services, financial prices have no relationship to speculators’ personal cost, effort or utility, so they have no basis for caring what level prices are.
A rising desire to own stocks, motivated by the herd’s waxing optimism, produces rising prices, and a falling desire to own stocks, motivated by the herd’s waxing pessimism, produces falling prices. That’s all there is to it.
Prechter’s Socionomic Theory of Finance is full of insights into how the often emotionally charged “crowd” behaves during every market cycle – and what you must do to set yourself apart.
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Robert Prechter Founder & President, Elliott Wave International
Robert R. Prechter’s name is familiar to market observers the world over. Since founding EWI in 1979, Prechter has focused on applying and enhancing the Wave Principle, R.N. Elliott’s fractal model of financial pricing. Prechter shares his market insights in The Elliott Wave Theorist, one of the longest-running financial publications in existence today. Prechter has developed a theory of social causality called socionomics, whose main hypothesis is endogenously regulated waves of social mood prompt social actions. In other words, events don’t shape moods; moods shape events. Prechter has authored and edited several academic papers. He has written 18 books on finance and socionomics, including a New York Times bestseller.
