Negative Feedback

AAA

DEFINITION of 'Negative Feedback'

A pattern of contrarian investment behavior. An investor using a negative feedback strategy would buy stocks when prices declined and sell stocks when prices rose, which is the opposite of what most people do. Negative feedback helps make markets less volatile. Its opposite is positive feedback, in which a herd mentality pushes high prices higher and low prices lower.

INVESTOPEDIA EXPLAINS 'Negative Feedback'

On an individual level, negative feedback can refer to a pattern of behavior in which a negative outcome, such as executing a losing trade, causes an investor to question his or her skill and discourages him or her from continuing to trade. Developing a rational trading plan and sticking to it can help investors maintain confidence and avoid falling into a negative feedback loop even when they execute a losing trade.


RELATED TERMS
  1. Positive Feedback

    A self-perpetuating pattern of investment behavior. The herd ...
  2. Negative Return

    This occurs when a company or business has a financial loss or ...
  3. Negative Assurance

    A representation that particular facts are believed to be accurate ...
  4. Negative Verification

    A system of confirming that a bank's records agree with a customer's ...
  5. Indicator

    Statistics used to measure current conditions as well as to forecast ...
  6. Volume

    The number of shares or contracts traded in a security or an ...
Related Articles
  1. Patience Is A Trader's Virtue
    Trading Strategies

    Patience Is A Trader's Virtue

  2. 9 Tricks Of The Successful Forex Trader
    Forex Education

    9 Tricks Of The Successful Forex Trader

  3. Using Feedback To Improve Your Trading
    Forex Education

    Using Feedback To Improve Your Trading

  4. Traders: Profit From Other Investors' ...
    Active Trading

    Traders: Profit From Other Investors' ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center