How to judge yesterday?

Yesterday I posted a “complaint" article suggesting the financial market is not always concerning all expected factors. Today there was a retreat in the solar industry in the stock market. This is a move that the market felt it had overreacted to the solar eclipse. We would see such retreat after some sharp price rises and drops. This is normal; though it partially reflects the irrationality of the market, it fits our expectations about our human beings' behaviours.

When we see a signal, the first thing we think about is how to react to this signal rather than thinking about the credibility of the signal. This is normal and fits our best interests, because we are generally risk averse and loss averse. When facing very likely either price rise or drop, not reacting to the price change fast enough is a loss to us. When we are not reacting to the signal that signals profitable opportunities but are checking the credibly of the signal, though we are not facing direct costs and losses, we are facing extraordinary opportunity costs; similarly when not reacting to the signals that signal potential losses, every second when we are checking the credibility of these signals, we are facing direct losses when others are reacting to these signals and dragging the market prices downwards. Therefore, under either circumstance, once we capture any possible signal, the first thing we need to do is to react to the signal rather than to check the credibility of the signal.

In the future, once AIs (including algorithmic trading) are more widely used in the financial market, such phenomenon I think will not change. AIs are faster than humans, but compared with other AIs, they are still at similar levels; instead of using their capabilities to analysing the credibility of the signals in the markets, the AIs are still better to try to react to the signals ahead of other AIs. 

Therefore, to conclude, at any time, reacting fast is the best strategy at all time.