What is a Freak Trade & How to Identify it

A freak trade in the stock market is like a sudden/ unexpected move in a stock price.

Imagine you’re riding a bike smoothly, and suddenly it hits a big bump making you jump unexpectedly. That’s what a freak trade does to a stock’s price.

Sudden Movement in the Price:

A freak trade is when a stock’s price makes a rapid movement (up/ down) in a very short period of time, in just a couple of seconds/ minutes.

Unusual Volume:

During a freak trade, there’s also a rise in the volumes (increased quantity in the buying/ selling). It’s like a sudden rush of people trying to buy or sell that stock.

Causes of Freak Trade:

The reason behind the freak trades is due to technical glitches, software errors, or even large trades executed by the Institutional Investor’s by mistake.

When such a sudden move occurs, it will create panic in the market. People might start selling or buying more, adding to the chaos.

Impact of Freak Trades:

A freak trade can lead to significant financial gains or losses for traders and investors within short period of time. Some people might get benefit if they’re on the right side, but most of the people witness losses.

Market Reaction:

After a freak trade, regulators and stock exchanges usually step in to investigate what happened and sometimes cancel or correct the trades to ensure fairness.

Conclusion: A freak trade is like a surprise party, but not everyone enjoys it. It’s like a sudden burst of excitement or shock in the stock market.

Traders and investors need to be careful and prepared for such unexpected events to safeguard their capital.