Panic Buying

Written By
Paul Tracy
Updated August 26, 2020

What is Panic Buying?

Panic buying refers to the purchase of a stock immediately after a sudden, substantial price increase.

How Does Panic Buying Work?

Investors watching the market may jump to buy a stock immediately after a major move in the stock's price, hoping to take advantage of the surge in the price.

Why Does Panic Buying Matter?

Investors may buy stock for a number of reasons. Fear of being left out of the next big thing, however, is not the best reason. Panic buying usually is the result of the herd instinct among some investors.  While there may be some gains on the residual increase in the price spike, it is often too little, too late.

If you're an active trader vulnerable to panic buying, click here to read Five Tools for Making a Snap Buy/Sell Decision to learn valuable tips for trading in fast-changing markets.