Herd effect means that in an investment group, a single investor always acts according to the actions of other similar investors, buying when others buy and selling when others sell. There are other factors that lead to the "herd effect". For example, some investors may think that others in the same group have more information advantages. Herd effect may also be triggered by institutional mechanisms. For example, when asset prices suddenly drop, causing losses, some investors have to cut their positions and sell assets in order to meet the requirements of additional margin or comply with the restrictions of trading rules. At present, the enthusiasm for investing in stocks has increased greatly, and the energy of individual investors has accumulated rapidly, which is easy to form a convergent herd effect. Confidence is overwhelming when chasing up, but when diving in the market, panic psychology also begins to produce a chain reaction, and people flee in panic, so it is normal to enlarge the amount when diving. Only then is it easy to kill the stock at the floor price. This is the fundamental reason why the bull market rises slowly and falls quickly, and the fall is often in place at one time. But we need to remember that under normal circumstances, this is not the time to go out.

Herd effect is a phenomenon of conformity and imitation. There are many reasons for this effect; Herd effect leads to irrational investment by investors, which urges investors to chase up and down, distorting investors' beliefs and judgments. Investors should correctly understand its impact, strengthen independent analysis and judgment, improve their psychological tolerance to risks, and formulate quantitative standards for selecting varieties to avoid and reduce its negative impact.

There are many reasons for this effect; Mainly in the case that China's securities market system is not perfect, the stock market is unpredictable, people can't find the law of stock market changes, have no confidence in their own judgment, and are afraid of failure. Coupled with people's comparison psychology, people have this herd effect, just as people often say that they would rather be big stars in small cities than small stars in big cities. In fact, this person is the same in small cities and big cities, but he has the psychology of keeping up with others. The success or failure of securities investment is related to the immediate interests of investors. People pay close attention to the rise and fall of stock prices, and the stock market is unpredictable, which has caused invisible pressure on investors. Most investors succeed, but when they fail, there will be inner conflicts and psychological imbalances. When most people fail, they also fail, which will reduce many conflicts and imbalances. Just like when the market falls and the stocks they buy and sell also fall, people will not complain about their investment mistakes, and even be complacent because their stocks have not fallen below the market. Therefore, great psychological pressure makes investors willing to be close to most people, which leads to the herd behavior of imitating others. To alleviate the psychological pressure of securities investment, we all know that speculating in stocks is actually speculating on everyone's confidence in this stock and speculating on everyone's recognition of this stock, so now investors are willing to produce and believe this herd effect to reduce and reduce the risk of the securities market. As a result, there are a lot of gossip and "inside information" in the market, which leads to a lot of "Darkmouth" in the market. Later, we can write how to correctly understand the herding effect in the real society, understand it, and use it as a useful tool for our stock trading.