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[thought] 8th May 2010 -> Computer Glitch caused huge Dow Jones drop?

More than 10 days after the incident, I have only decided to read up more about it. And this represents my concern on the overall financial market. I know that I might lose my job if the whole market collapses, I know that millions of lives will be affected… etc. But I also know that if nothing drastic is being done about the financial weather, the society will grow addicted to fast money.

My take of the huge Dow Jones drop is that for maybe the first 100 points drop, it could be due to a computer glitch, but after that, the rest of the drop are cause by too many stock traders (even “investment bankers”) out there that don’t understand the fundamental well.

You can call me whatever you want, but after i have attended a ‘Trading Training” organise by the a local bank, I can’t help thinking that way. For the whole training, the trainer went along and tell what each Doji (candle stick chart of financialy traded assets) represent and what to expect after that. During the ‘training’ I was looking around and seeing 80% of the ‘class’ paying close attention and taking notes. To be honest, I was actually thinking along the line of… “wow! I should have learn about this earlier.”, but it suddenly struck me. These are all behavioral science, psychology… etc. With enough like minded people looking at the “signs” the same time, will bring around the results intended. IT’S SPECULATION!

So, back to the biggest Dow Jones drop in history. With the amount of speculator out there, with the addiction to fast money, with the limited knowledge of majority of the traders out there, I am not surprise that the whole incident was caused by a chain reaction of traders who only knows how to look at Doji, and not really understand the economy. Herd mentality? Maybe. That’s my take.