In the German-speaking world, the term “Dienstmädchenbörse” (literally a “household servant market”) is used humorously to describe an inflationary phase in a stock’s trading cycle. In a “dienstmädchenbörse” numerous small investors buy stocks which, to the layperson’s eye, appear to be a good investment.

This injection of capital from people who have little or no insight into the actual financial situation of the company being traded can lead to inflated rates, which are eventually corrected by subsequent rate declines.

Experienced traders can take advantage of this market phase to sell their securities at the highest possible price before the market enters into the next phase and rates drop to levels that match the stock’s actual value.

More on this topic:
Swiss online broker comparison
How to buy stocks: best trading tips
Stock trading: common pitfalls

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