Is black swan just a hype?
04 October 2024

Paul Reid
Financial Journalist at Exness
Share
Ever heard a Black Swan event? What exactly is it and is one coming?
The Black Swan: Myth vs. Reality in Trading
The term "Black Swan event" is thrown around so much these days, it's practically lost its feathers. But let's be honest, most of what's labeled a "Black Swan" in the financial world is just a regular ol' goose dressed in dark clothing.
So, what really constitutes a Black Swan?
Think of it like this: Imagine a world where everyone believes the Earth is flat. Then, someone sails around the globe and proves it's round. That's a Black Swan – an event so shocking and unexpected, it completely shatters existing beliefs and forces a total paradigm shift.
Nassim Nicholas Taleb, the guy who popularized the term, defines a Black Swan as having three key traits:
Why "Predicting" a Black Swan is Like Spotting a Unicorn
The very act of predicting a Black Swan is paradoxical. If you can see it coming, it's not a Black Swan. It might be a significant event, a risk, or a crisis, but not a true outlier.
Think of the 2008 financial crisis. While devastating, it wasn't a Black Swan. The warning signs – the housing bubble, subprime lending – were there. Some experts even sounded the alarm, but their voices were drowned out by the market's euphoria.
The Black Swan as a Media Bogeyman
The financial media loves the Black Swan narrative. It's dramatic, it grabs attention, and it keeps traders on edge. It's the perfect recipe for fear-mongering and clickbait headlines.
But here's the truth: most "Black Swans" in the media are just hyped-up versions of existing risks. Interest rate hikes, geopolitical tensions, even pandemics – these are not Black Swans. They are known risks, often with well-established probabilities.
Trading in a World of Swans (Black and Otherwise)
So, how should traders navigate a world where Black Swans might lurk, but "regular" swans are always present?
Conclusion
Black Swans are rare. Trying to predict them is futile. Instead, focus on what you can control: your strategy, your risk management, and your emotional response to market events.
Remember, a true Black Swan is like a unicorn – mythical and elusive. Don't let the fear of the unknown derail your trading journey. Stay informed, stay disciplined, and keep your eyes on the real swans – the market trends, economic data, and company fundamentals that drive trading success.
Explore Exness assets and markets
Practice trading with our various assets from leading global financial markets with the same conditions as on live trading accounts.
Try free demoRelated
Exness Trade app
Trade with confidence anytime, anywhere.
Trading is risky. T&Cs apply.