Panic in stock trading and real life

Stock prices have never been known to be stable, but the most dramatic changes occur when panic sets in on the stock market.

First, an event occurs that triggers a downward trend, reducing the number of buyers and increasing the number of sellers.

Most traders begin to enter into sell transactions, getting rid of unpromising assets, and the price rapidly declines.

News reports about a sharp decline in one asset or another do not add to optimism.

In addition to stock market players, panic is gripping ordinary citizens as well, who are rushing to buy up foreign currency en masse to somehow protect their savings from devaluation:

But for some reason it turns out that most of the actions were in vain and the losses from panic decisions led to much greater losses than complete inaction.

For example, some of my friends bought dollars at their peak price of 170 rubles per US dollar. However, less than a month later, it's now quite possible to make a detailed exchange at a rate of 1 to 110 rubles.

How should you behave when panic occurs?

There are several simple rules that will help minimize potential losses:

• Prepare – when trading on the stock exchange, this is quite simple, you just need to remember to set a stop loss , regardless of how confident you are in the outcome of the transaction:

Now you can insure your money in everyday life; many banks support pending orders. For example, if you have a large sum of rubles, you can enter an order to exchange it for dollars if the price falls below 90 rubles per dollar.

• Don't panic – when you don't have access to inside information , events reach you late. As a result, you're late making a decision and making the worst possible deal.

As a rule, any significant price decline is followed by a pullback, which can be 10-20% or more. This is when losing trades should be closed, not at the price low.

• Analyze – it often happens that the entire market collapses, and even assets that are not affected by the event that caused the price drop go down.

For example, shares of Ros AGRO, a major agricultural company, plummeted 20% on March 24, 2022. The company is a food producer, and food prices are expected to rise this year. Therefore, Ros AGRO shares should not have been sold immediately after the collapse, as the price is guaranteed to recover.

And the most important thing when panic sets in is to not make rash decisions. You always have a little time to think things through, weigh the pros and cons, and only then take action.