Give it any name you like !!! , fall with ferocity, shooting star or bottomless pits.
Look at the stock markets world over. It is a scary situation even for the bold and stone hearted !!! Markets falling by 300, 400, 600, 1000 points in a day's time in different countries.
Let us not look at reasons. But why does it fall so fast? This is the question. Let us find out the answer.
The stock market is not inhabited by only intelligent investors. It is a shandy of all kinds of people - the intelligent ones, greedy sharks, opportunist invaders, cunning jackals, pessimists, impatient personalities, over leveraged and panic struck all others.
What exactly happens when a market falls ? First the expected or unexpected news hits the markets.
The intelligent and savvy investors are prepared. They sell first on futures market( sell first and buy later) and protect their profits. They intelligently position themselves with option strategies to profit from the down side. Having sold first in the future markets and protected themselves, they start unloading their shares in the cash markets.This pushes the markets down.
Confused buyers from the trading and investing public withdraws all their buying orders and wait on the sidelines. Market is left with no buyers.
Opportunist bear camp senses blood. They sell unabated. No buyers and all sellers, market is without a bottom now.
Weak hearted and over leveraged traders enter the stage. To avoid the future losses( either real or assumed) they too will place sell orders. Complications intensify.
Financiers who have funded against the collateral of shares make their entry. They demand additional margins, if not arranged immediately, will unload the shares in their custody. Hell breaks loose.
This is the anatomy of a free falling market. It is a dynamics of compulsion rather than the true valuation of markets.
As informed investors, let us also be opportunists. Take advantage whenever the market plunges. If you are an investor....a long term investor, you are sure to make good returns.