Herding in financial Market: How to do it?
Remember a folk story about pied piper of Hamelin (https://en.wikipedia.org/wiki/Pied_Piper_of_Hamelin) ? Once upon a time, Hamelin town was full of rats. Yet, the pied piper has solution for this rat issue. He promised to drowned all rats and the city has to pay him 1000 golds. After mayor of Hamelin agreed, the piper played his pipe and lured the rats into Weser river, and all rats were drowned (except one rat). How? All rats HERD him because of the music. I don’t want to continue the story because it is a sad story.
This herd behavior is also occurred in financial market. Yes, herding is trading behavior of investor by copying the behavior of other investors. Continue reading