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The Complete Idiot's Guide to Stock Investing Fast-Track by Ken Little

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Don’t Follow the Crowd

Despite all the news about computer trading programs that use sophisticated software to make buy and sell decisions, there are still humans involved in the daily ebb and flow of stock market prices. Humans, many of whom want to be as unemotional as a computer program, are still driven by two basic human emotions: fear and greed. When these emotions take over the market, logic is replaced.

These powerful emotions can spread and infect otherwise rational people. There are many examples of what happens when emotions overrun logic. The classic example is the dot.com boom of the late 1990s that drove the stock market to put insanely high prices on companies that were little more than a rough outline written on a napkin. Companies ...

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