Every investor/trader is looking to gain an advantage. The best way to accomplish this is to learn 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.

1. A Guide forTraders
(When Others Are
Panic Selling)

2. Every investor/trader is looking to gain an advantage. The best way to
accomplish this is to learn 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

3. 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.

4. 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.

5. 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 isn’t 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:

6. 1. AssessThe Market Thoroughly
Why are people selling their assets?
What factors are influencing the market? What
are the existing risks for your portfolio?
It’s 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 wouldn’t know
what you should do yourself in the present market conditions.
So, identify the “why” of the current sell-off.

7. 2. Eliminate Fundamentally Bad
Assets
The market will inevitably recover. But that won’t exactly be the case for
everyone or every asset.
During the sell-offs, many assets or instruments will 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.

8. 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 doesn’t 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 you’re a trader, don’t compel yourself
to make unnecessary trades. It’s better to take long-term positions in fundamentally
strong assets than day trading in falling, weaker assets.

9. 4. Leverage The Exhausted Selling Model
The exhausted selling model is a contrarian trading strategy that identifies the point in
a stock’s 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.

10. 5. Control Your Emotions
When everyone in the market is selling, it’s difficult not to be a part of the FUD
and sell your assets. But it is here it’s 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 that’s triggering your fear, uncertainty, and doubt.

11. Final words
As a trader, you should keep your eyes on the markets and look for signs of
panic selling. It’s 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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