Nasdaq 100 - 3 months of gains wiped out in about a week

[boxoffrogs]

Does anyone know why stocks climb relatively slowly but dump so quickly? I know the basics, more selling than buying. But how is it that going up is slow and steady, but going down is like a drill? Shouldn’t they be relatively the same pace? Just curious, no panicking or changing my investment strategy. I’m mostly in the S&P anyway

 

[formerrocor]

@boxoffrogs People can invest only as quickly as they make money.

But they can panic dump all their money at once.

 

[cstx5]

@formerrocor This but I’d also add that selling pressure is greater on the way up than buying pressure is on the way down.

As equities rise, some people cash in positions to lock in profits and rediversify. Both a mix of folks who got in much earlier and have already made massive gains, and later entrants who just want to make a quick profit.

On the way down, the sellers just sell but buyers stay on the sidelines until prices stabilize near “the bottom.” No one wants to catch a falling knife in the air.

 

[styhurst]

@cstx5 Great explanation! I’m gonna copy and paste this the next time somebody asks this question.

 

[magnumpi2]

@styhurst Don't forget credit lol

 

[komani]

@cstx5 I wonder if this explanation also explains some of the euphoria that we've seen in markets over the last few years - why there haven't been really deep, lasting draw downs in equities. People are more familiar with the mindset of "buying the dip" - hence there have been more people willing to risk catching the falling knife. So when there has been a sell off, there's been more buying pressure than ever before.

 

[cstx5]

@komani I think there’s some truth to this. More people than ever know the importance of investing and it’s never been easier to invest.

So people wait on sidelines for a “cheap” moment to jump in.