A Guide for Traders (When Others Are Panic Selling)

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A Guide for Traders (When Others Are Panic
Selling)
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Every investor/trader is looking to gain an
advantage. The best way to accomplish this is to
l earn as much as possible about panic selling.
This will give you insight into how stocks sell
off during periods of high volume and volatility
and how this affects the charts. This type of
activity is known for creating the best trading
opportunities because the stock price falls more
rapidly than normal, making it easier to get in
at a better price. Be fearful when others are
greedy, and greedy when others are fearful.
Warren Buffet
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What is Panic Selling? (Why do Traders Panic
Sell?)
Anyone who watches the markets on a daily basis
has probably seen panic selling occur. Panic
selling is a term used to describe the sudden and
often drastic decline in the price of a
security, usually over a short period of time. It
can be triggered by traders that are looking to
sell in haste due to a change in price momentum,
but it can also be caused by an unexpected piece
of news that catches the market off guard. The
first stage of panic selling stock or other
assets is something that causes a rapid decline
in price over high volume. This typically occurs
as a result of bad news, or if there is simply
too much supply for the demand at that particular
time. Sellers attempt to get out before anyone
else does, which results in overall panic
throughout the market and pushes prices even
lower.
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The second stage occurs when buyers and sellers
attempt to control the trend on high volume, but
neither side is able to do so. The stock moves
back and forth between each side before
eventually making a decision one way or another.
If buyers win out, then the stock will typically
experience some follow- through and move higher
on low volume. However, if sellers win out
instead, then you may see additional panic
selling as people try to get out before the
price goes any lower. In all, the event of panic
selling is very dynamic, influenced by many
direct and indirect factors. In these moments,
even though many traders see significant damages
to their portfolios, the smart ones find ways to
still make profits. Remember, in any financial
market, no matter the persisting condition, there
are always opportunities. And if you know how to
identify these opportunities and tap on them,
you can keep your portfolio thriving even during
the instances of panic selling.
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How to Profit During Panic Selling
Trying to predict the future of a stock can be
difficult, but remaining calm and collected when
panic selling occurs is key. Whether trading as a
speculator or an investor, determining what is
important and what isnt will help you in the
long run. Similarly, knowing your risk tolerance
level is also critical to avoiding panic selling
stock. As such, here are some of the tips on how
traders can make a profit during panic selling
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1. Assess The Market Thoroughly
Why are people selling their assets? What factors
are influencing the market? What are the
existing risks for your portfolio? Its essential
you do thorough research of the market so as to
make an informed decision yourself. Unless you
know why people are panic selling, you wouldnt
know what you should do yourself in the present
market conditions. So, identify the why of the
current sell-off.
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2. Eliminate Fundamentally Bad Assets

• The market will inevitably recover. But that wont
  exactly be the case for everyone or every
  asset.
• During the sell-offs, many assets or instruments w
  ill crash some may never recover while others
  may take a lot of time.
• So, this is an ideal period to eliminate the
  fundamentally weaker or bad assets from your
  portfolio instead of carrying a sink with the
  ship mentality.
• Audit your portfolio identify the assets that
  you need to get rid of. And get rid of them even
  if it means sustaining some losses.

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3. List Down The Golds

• When the supply is more than the demand, the
  price of the asset will slip down! This is a
  perfect opportunity to enter into new positions
  of underpriced assets.
• But, of course, this doesnt mean you buy
  everything that is trading at a low price. The
  key here is to do a fundamental analysis of
  different assets and find golds in that aka
  discover better opportunities with good potential
  in the medium and long run.
• Consolidate your portfolio. Remember, even if
  youre a trader, dont compel yourself to make
  unnecessary trades. Its better to take long-term
  positions in fundamentally strong assets than
  day trading in falling, weaker assets.

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4. Leverage The Exhausted Selling Model

• The exhausted selling model is a contrarian
  trading strategy that identifies the point in a
  stocks price history at which there has been an
  unusually high level of panic selling.
• The model is based on the hypothesis that
  following periods of panic selling, subsequent
  trading activity will be light and buyers will be
  scarce until the market registers their
  confidence in the stock by pushing its price back
  up to its moving average. The contrarian
  investor can take advantage of this phenomenon
  by purchasing shares near the end of a
  panic-selling period, when prices are especially
  depressed and patience is particularly important.

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5. Control Your Emotions
When everyone in the market is selling, its
difficult not to be a part of the FUD and sell
your assets. But it is here its important to
hold your emotions and act more rationally. For
starters, keep a distance from the news that
might be spreading hysteria in the market. Focus
on your own goals and strategies believe in your
plan. If needed, take a break from your trading
life shut down your PC and smartphone. Avoid
anything thats triggering your fear,
uncertainty, and doubt.
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Final words

• As a trader, you should keep your eyes on the mark
  ets and look for signs of panic selling. Its
  important to recognize a market in panic.
• When panic selling occurs, protect yourself and
  your portfolio by finding the best exit strategy
  for your current position.
• Panic selling can be great for traders, as some of
  the best opportunities arise when prices are
  dropping quickly.
• Therefore, if you find yourself seeing these signs
  in the market, take note and keep an eye out
  for opportunities.

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