Butterfly Effect
The Butterfly Effect postulates that small changes in one place can lead to significant changes elsewhere
Butterfly Theory Basics
- Postulates that a small changes in one place can lead to significant changes elsewhere
- Typically the larger changes occur over a period of time
- There is not a clear path from the small change to the big change
- Changes cascade from one to the next in a chaotic manner
Extreme Examples To Illustrate the Butterfly Effect:
- A butterfly flaps its wings in South America and Causes an ice storm in Poland
- A small trader sells 1 share of stock which later triggers a crash in that companies share price
- Markets and all their actors are interconnected and not predictable