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<blockquote data-quote="HerefordSire" data-source="post: 391594" data-attributes="member: 4437"><p><em>One way to <strong>diversify </strong>your position is to diversify the brain cells controlling emotional trading decisions through studying history. Throughout history there are prime examples of how people lost their wealth. The most interesting example I have studied is the Holland Tulip bubble:</em></p><p></p><p>Initially, only the true connoisseurs bought tulip bulbs, but the rapidly rising price quickly attracted speculators looking to profit. It didn't take long before the tulip bulbs were traded on local market exchanges, which were not unlike today's stock exchanges. By 1634, tulip mania had feverishly spread to the Dutch middle class. Pretty soon everybody was dealing in tulip bulbs, looking to make a quick fortune. The majority of the tulip bulb buyers had no intentions of even planting these bulbs! The name of the game was to buy low and sell high, just like in any other market. The whole Dutch nation was caught in a sweeping mania, as people traded in their land, livestock, farms and life savings all to acquire 1 single tulip bulb!</p><p></p><p>The financial devastation that followed the tulip bulb crash lasted for decades, crippling Dutch commerce. The price of tulips at the height of the mania was $76,000; 6 weeks later they were valued at less than one dollar! The only people who prospered from the insanity were the smart money who liquidated at the top.</p><p></p><p>In market manias, the investors are acting irrationally. Excessive greed causes people to feel financially invincible and make decisions that cause financial devastation. This process occurs regardless of if the market is a commodity market or a paper market like stocks. The moral is clear; the only way to survive is to be the smart money.</p><p></p><p><a href="http://www.stock-market-crash.net/tulip-mania.htm" target="_blank">http://www.stock-market-crash.net/tulip-mania.htm</a></p></blockquote><p></p>
[QUOTE="HerefordSire, post: 391594, member: 4437"] [i]One way to [b]diversify [/b]your position is to diversify the brain cells controlling emotional trading decisions through studying history. Throughout history there are prime examples of how people lost their wealth. The most interesting example I have studied is the Holland Tulip bubble:[/i] Initially, only the true connoisseurs bought tulip bulbs, but the rapidly rising price quickly attracted speculators looking to profit. It didn’t take long before the tulip bulbs were traded on local market exchanges, which were not unlike today’s stock exchanges. By 1634, tulip mania had feverishly spread to the Dutch middle class. Pretty soon everybody was dealing in tulip bulbs, looking to make a quick fortune. The majority of the tulip bulb buyers had no intentions of even planting these bulbs! The name of the game was to buy low and sell high, just like in any other market. The whole Dutch nation was caught in a sweeping mania, as people traded in their land, livestock, farms and life savings all to acquire 1 single tulip bulb! The financial devastation that followed the tulip bulb crash lasted for decades, crippling Dutch commerce. The price of tulips at the height of the mania was $76,000; 6 weeks later they were valued at less than one dollar! The only people who prospered from the insanity were the smart money who liquidated at the top. In market manias, the investors are acting irrationally. Excessive greed causes people to feel financially invincible and make decisions that cause financial devastation. This process occurs regardless of if the market is a commodity market or a paper market like stocks. The moral is clear; the only way to survive is to be the smart money. [url=http://www.stock-market-crash.net/tulip-mania.htm]http://www.stock-market-crash.net/tulip-mania.htm[/url] [/QUOTE]
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