Trading during volatile markets
It's natural to feel anxious about your investments when the markets are volatile. See how you can weather the market swings.
POINTS TO KNOW
- Trading volumes are high during volatile markets.
- Volatile markets can delay executions of trades.
- Don't let emotions override the decisions you made for your long-term financial plans.
What to expect
Volatile markets are extreme and unpredictable. They're characterized by:
- High trading volumes.
- The inability of market makers and specialists to quickly match buy and sell orders.
- The imbalance of trade orders in one direction.
Under these conditions, stock prices can change quickly and dramatically. Real-time quotes can lag behind actual market movements.
When you're placing trades in volatile markets, keep these points in mind:
Orders may be delayed
Your order may execute at a price significantly different from the quotes displayed when you entered your order.
Set prices to reduce risk
Placing a limit order allows you to set an upper or lower limit on the amount you're willing to pay or accept for a stock. There's no guarantee your order will execute.
Watch for systems slowdowns
Because of heavy trading volume in a particular security or the market overall, you may not be able to place an order electronically or you may have difficulty reaching an investment professional by phone.
Keep in mind …
It's tempting to want to do something when markets are volatile. But that's exactly when you shouldn't act on emotion.
Take a step back and think about your long-term goals and asset allocation. Don't let the day-to-day market noise send you off course.
Stocks & ETFs
An order to buy or sell a security at a specified price (limit price) or better. The execution is not guaranteed.
The way your account is divided among different asset classes, including stock, bond, and short-term or "cash" investments. Also known as "asset mix."
The sum total of your investments managed toward a specific goal.
An investment that represents part ownership in a corporation. Each share of stock is a proportional stake in the corporation's assets and profits.
A loan made to a corporation or government in exchange for regular interest payments. The bond issuer agrees to pay back the loan by a specific date. Bonds can be traded on the secondary market.
Very short-term investments—such as money market instruments, CDs (certificates of deposit), and Treasury bills—that mature in less than one year. Also known as cash reserves.
The trading of a universe of investments, based on factors like supply and demand. For example, the "stock market" refers to the trading of stocks.
Stocks, bonds, money market instruments, and other investment vehicles.