Panic in stock trading and real life

Exchange rates have never been stable, but the most dramatic changes occur when panic begins on the stock exchange.

First, an event appears 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 goes down.

News reports publishing information about a sharp drop in one or another asset do not add optimism.

In addition to stock exchange players, panic also grips ordinary citizens, they rush en masse to buy foreign currency in order to somehow protect their savings from depreciation:

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

For example, some of my friends bought dollars at the peak of their price for 170 rubles per 1 US dollar. Moreover, not even a month has passed and now it is quite possible to make a detailed exchange at the rate of 1 to 110 rubles.

How to behave when panic occurs?

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

• Prepare – when trading on exchanges, this is quite easy to do, just remember to set a stop loss , no matter how confident you are in the result of the transaction:

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

• Do not panic - in the case when you do not have access to insider information , events reach you late. As a result, you are late with the decision and make the most unprofitable deal possible.

As a rule, after any strong price collapse there is a rollback in the opposite direction; the magnitude of this rollback can be 10-20 percent or more. This is when you should close unprofitable trades, and not at the minimum price.

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

For example, shares of the largest agricultural company Ros AGRO plummeted down 20% on March 24, 2022. At the same time, the company is a food manufacturer, and food prices are predicted to rise this year. Therefore, Ros AGRO shares should not have been sold immediately after the collapse, since the price was guaranteed to return to its position.

Well, and most importantly, when panic occurs, do not make rash decisions; you always have a little time to think about situations, weigh the pros and cons, and only then proceed to active action.