Defining bandwagon effect
AtoZ Markets – There is a link between the bandwagon effect and a lot of branches in society. Some are psychology, politics, economics, etc. People put aside their values, preferences, and beliefs and then follow a particular craze that many people are also following.
Initially, the bandwagon effect came from politics. Later on, people started using it in connection with consumer behavior, and investment, and finance.
We can also call bandwagon as herd mentality since herds stay together in a large group of numbers. Why does this happen? There is pressure on individuals. When a majority of people do something, it is hard not to do it as well. Examples of trends that people follow include diets, fashion, elections, music, and social media.
When did the term bandwagon start?
A bandwagon is a float or a decorated platform in a parade. People are encouraged to jump, socialize, and enjoy the festivity and music. Since this music is catching and infectious, many people will surely jump aboard the float.
Trade stocks safely with AtoZ Markets approved brokers:
In the 19th century, political campaigns used the bandwagon and music strategy to connect with candidates and the idea of having fun. Whoever is not on the bandwagon are missing out.
After some time, people used this strategy to manipulate and influence others to join a specific fad in politics or purchasing. People who haven't joined the bandwagon yet start to think that it must be excellent since many people support the trend. This fad that everybody is a part of blinds people that they fail to think about their likes and beliefs.
People started voting for the candidate that most people voted for in the elections. They thought that the candidate must possess good attributes and qualities to make him gain this much support.
Another reason people do this is that they also want to belong and be part of the majority, even if it compromises their own beliefs. This mentality became the root of the term "bandwagon effect."
From politics, the bandwagon effect started to spread even in terms of consumer behavior. It is most prevalent in an economic bubble or a bull market.
Before purchasing, a wise consumer makes sure that a product has excellent quality. How? The consumer can ask others about their experience and reviews on a particular product. Following people's lead can be reasonable only if you have the same preferences after gathering their opinion and experience with the said product.
How is it different from the bandwagon effect? Sometimes, the gathered information is not entirely accurate. Marketers can make a product seem good even if it's not. People tend to buy things that they don't even need, want, or afford because of self-image and other people.
Investment and Finance
Investors will feel more secured with an assurance that other people also purchased the same investment. A bandwagon can be the underlying reason for a gradual then skyrocketing stock. Investors tend to buy stocks that everybody is buying. It is famous since the bandwagon heavily influences it.
Should you trade stock on your own at all?
Before you start trading stocks, you'll want to read this.
Our in-house trading expert Dr Yury Safronau, PhD in Economic Sciences, gives you daily his best forex, metals, and cryptocurrencies to buy and sell signals right now.
His trading strategies which are based on non-linear dynamic models have achieved more than 65 000 pips of profits since 2015. And right now there are some very strong buy and sell signals across several markets you don't want to miss.
Want to see which ones?