A stock market crash is a sudden and dramatic drop in stock prices in the market. A crash usually results from a stampede. This usually occurs when people start rushing to get rid of their stocks for a number of reasons such as: B. if they lose confidence in the market. A crash can also result from inflation and other underlying economic conditions and problems. A stock market crash can last for days or even months and is very devastating to the economy. As with any disaster or event, certain signs will always be there. It is therefore important for investors to be vigilant to avoid market crashes, which can take many years to recover from.

 

When investors are bullish and speculative about a particular stock that isn’t doing well, they typically buy those stocks. Due to investor interest in boersencrash 2022 these low trading stocks, more and more people are starting to buy them. This causes the price of the shares to rise, and they continue to rise as more investors buy them. The price bubble is very risky for any stock market. When investors see the bubble, they panic and start selling their stocks. In no time, everyone is trying to sell the same stocks, causing their prices to drop. If this happens to multiple stocks at once, it could lead to a market crash.

 

Investors’ psychological attitudes can also lead to a stock market crash. This happens when investors refuse to buy stocks that have fallen sharply in price. Investors choose to exit the market for their own reasons. This sets off a chain reaction where other investors decide to sell their stocks and exit the market, regardless of how the market will behave. When this happens, it will cause the price to drop dramatically and could lead to a market crash.

 

Political instability or a change of government are other factors that can lead to a market crash. When investors are uncertain about a country’s future, they will start to exit the market. Foreign investors and other large investors are usually among the first to pull out. When this happens, all other investors quickly sell their shares and exit the market. This happens when a country is faced with the threat of war and conflict.

 

Anatomy of stock market crashes

 

My study of stock market crashes found that most of them share a number of common characteristics. This article describes some of these attributes.

 

Suddenly

Crashes do not give prior warning before they occur. If crashes could be predicted with any degree of reliability, then there would never be crashes. Stock market crashes end just as suddenly as they began. I’m aware that there are some people who try to predict crashes, but my personal opinion is that your energy is better spent on other things.

 

Spicy

Take a look at a diagram of a crash and it would be obvious to you that one distinguishing feature of crash action is its sharpness. The crash looks like the edge of a cliff and is actually just as dangerous. The sharp falls of market crashes are compounded by a massive imbalance between buyers and sellers. Basically everyone is heading towards the exit at the same time.

 

Relentless

Normal market movements are characterized by trend movements interrupted by trend retracements. In fact, the Elliot Wave theory is based precisely on this phenomenon. However, during a crash, price action is generally one-way – down, with very little upside retracement. It’s this feature that makes crashes so bad for the wallet.

 

Statistically extreme

If you draw a bell curve of daily price changes, a crash lies on the far left of the curve and is what statisticians call an outlier. This is why crashes are such rare occurrences. Despite their rarity, smart investors are always prepared for a crash. One way to do this is by using position sizing techniques that limit the amount of investment capital you risk.

 

Across the border

If there’s a crash, expect 99% of stocks to bleed red. There will be few, if any, survivors. Market makers note everything, whether justified or not, boersencrash 2022 so that even fundamentally sound stocks are not spared.

 

There are few market events as traumatic as a stock market crash. Any time you see a sudden, sharp, unrelenting, and statistically extreme downward market move, chances are you’re in for a crash. In fact, you’ll be very lucky if any of the stocks in your portfolio come out unscathed.