markets
Markets Run On Their Own Clock
The rule
Markets keep their own stretchy clock - racing in a crisis, crawling in calm. A whole month of risk can arrive in a single day.
Where it flips
Reading time as stretchy can make you feel every quiet day is a coiled spring, breeding needless worry and constant trading. The fix is to plan for a few fast days a year and then largely ignore the clock, rather than brace for disaster every session.
Clock time and market time are not the same thing. Mandelbrot pictured a 'trading time' that speeds up when news and fear pile in, cramming a month's events into hours, and slows to a crawl when nothing much happens. For an investor this means you cannot plan danger by the calendar - a sleepy quarter and a panicky afternoon can carry the same real risk, just packed very differently.
A worked example
Haridya assumes 'nothing much can happen in one day'. But on a shock results day her holding travels the distance she expected over a whole month, wiping out a quarter's gains between lunch and close. [illustrative]
How to spot it
- ·A single day that behaves like a whole month
- ·Long stretches where almost nothing moves
- ·'How did so much happen in one afternoon?'
Benoit Mandelbrot · The (Mis)behavior of Markets