What it is:
Panic buying refers to the purchase of a stock immediately after a sudden, substantial price increase.
How it works/Example:
Why it matters:
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.