Positive Feedback

A self-perpetuating pattern of investment behavior. The herd mentality that causes investors to sell when the market is declining and buy when it's rising is an example of positive feedback. Positive feedback is the reason why market declines often lead to further market declines and increases lead to further increases. It is also a source of market volatility. When a cycle of positive feedback continues for too long, it can create an asset bubble or a market crash.

On an individual level, positive feedback can refer to a pattern of behavior in which a positive outcome, such as executing a profitable trade, gives an investor the confidence to pursue further positive outcomes. Developing a rational trading plan and sticking to it can help investors stay confident and maintain a positive feedback loop even when they execute the inevitable losing trade.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Positive feedback — Alarm or panic can spread by positive feedback among a herd of animals to cause a stampede. Positive feedback is energy taken from the output of a system and reapplied to the input, which is phase congruent with the input signal. A system… …   Wikipedia

  • positive feedback — teigiamasis grįžtamasis ryšys statusas T sritis automatika atitikmenys: angl. positive feedback; regenerative feedback vok. Mitkopplung, f; positive Rückführung, f; positive Rückkopplung, f rus. положительная обратная связь, f pranc. réaction… …   Automatikos terminų žodynas

  • positive feedback — teigiamasis grįžtamasis ryšys statusas T sritis fizika atitikmenys: angl. positive feedback; regenerative feedback vok. positive Rückkopplung, f rus. положительная обратная связь, f pranc. réaction positive, f; rétroaction positive, f …   Fizikos terminų žodynas

  • positive feedback — noun feedback in phase with (augmenting) the input (Freq. 1) • Syn: ↑regeneration • Derivationally related forms: ↑regenerate (for: ↑regeneration) …   Useful english dictionary

  • positive feedback — noun Date: 1934 feedback that tends to magnify a process or increase its output …   New Collegiate Dictionary

  • positive feedback — See feedback …   Dictionary of molecular biology

  • positive feedback — Electronics. See under feedback (def. 1). * * * …   Universalium

  • positive feedback — noun Electronics feedback that tends to enhance the effect by which it is produced …   English new terms dictionary

  • positive feedback — /pɒzətɪv ˈfidbæk/ (say pozuhtiv feedbak) noun See feedback (def. 3) …   Australian English dictionary

  • positive feedback — affirmative reaction, positive response …   English contemporary dictionary

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