What is Availability Error?

Suppose you were thinking of buying or shorting a particular stock or future. You have read about the exceptional performance of the company. Being a "rational" investor who likes to undertake thorough research before buying a stock, you get a second opinion from a friend who informs you that he purchased this stock/future last month, and it has already increased by 60% in value. Extremely impressed, you instantly place a large order, only to find a few days later it has reached the top, commences a turnover, and then succumbs to a fall reversal in the following weeks. The "availability" of your friend's description and success have made you forget about objective technical analysis, discipline, and the need to stand apart from tipsters when making decisions. Try to avoid it!

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