The stock market is one of the most volatile in the world. A’s share price could rise from Rp 1000 per share to Rp 1,500 per share in just one day. and vice versa
There are many factors that cause the price of this tool to fluctuate. These factors range from domestic and international economic conditions. Company policy until the condition of the stock itself The price changes of these instruments are often sudden and unpredictable.
Of course, investors will be happy if the share price goes up dramatically. But what if the prices of these securities have dropped dramatically as well? How will it be? You forgot to set a Stop Loss and your stock price dropped drastically? So what’s next? What to do if the stock market goes down:
The reason for the stock crash
One way to deal with a huge drop in stock prices is to try to identify the cause first. This is what can cause the price of this tool to drop significantly. The following factors may occur simultaneously or individually:
1. The company’s financial position is deteriorating.
When the company is listed on the stock exchange There will be pressure from investors to keep the company profitable. Therefore, it is not surprising that the company’s financial condition is deteriorating. whether in terms of financial health or profits. will cause the share price to fall.
2. Company business policy
There are times when companies use policies that are not attractive to certain investors. As a result, these investors sell their shares and cause the company’s share price to fall. For example, a company may publicly declare its support for a particular political party. Of course, investors understand that they will sell their shares together.
3. Business uncertainty
This business uncertainty can be caused by external and internal factors of the company, external factors such as the COVID-19 pandemic, while internal factors are related to the company’s business only, for example, during the past 1 year. Hybe Corporation share price It dropped more than 50% due to uncertainty whether the members of the biggest boy band BTS will be enlisting in the military.
4. Market uncertainty
Generally, business uncertainty results in market instability before it pushes asset prices down. This market uncertainty often arises immediately after the release of big news about the company.
5. Rumors and Confidence
A drop in stock prices can also be caused by circulating unclear information about the stock. This information may be published by some individuals who really want to lower the price of the tool. for their own benefit
How to cope when stocks fall sharply
1. Calm yourself first.
The first step to take if the stock market crashes is to calm down. A calm mind will help you make rational and unhurried investment decisions.
Besides taking a deep breath, you need to understand that stock price declines are natural and can happen at any time. If the share price falls due to important news such as non-farm payroll announcements or inflationThen wait a few hours until the panic in the market is gone. Successful investors or traders are not the ones who can avoid falling prices. But it’s the one who can handle the price drop wisely.
2. Identify the cause
The second step is to identify what is causing the stock price to drop. As written above, there are at least 5 things that bring this price down. After identifying the factors that cause the price to fall Think again whether the decline due to this factor can last for a long time.
For example, your stock price has dropped due to a sector that has not benefited from the COVID-19 pandemic. Now, you can guess whether the pandemic will last or not. and long or not Can it hinder your investment goals?
3. Understand the risks
You can make at least 2 decisions when the stock price falls. The first decision was to sell. while the second decision is to keep (hold). Each decision has its own advantages and disadvantages.
The advantage of making the first decision is that you can avoid deeper losses and can still make a profit if the stock price is still above the price when you first bought.
The disadvantages of the first decision are You may have to cut your losses if the price is lower than the price when you bought it. and or should you lose the opportunity to profit from the stock in the future
On the other hand, if you choose the second option You will not miss any future profit opportunity. The downside is that you have to suffer losses for a period of time (stock stuck).
4. Look at the basics and technical aspects.
To help build yourself a sell or hold option when the stock price falls are: See the company’s basic conditions. Previous issuers and technical conditions It is important to state whether the decline was due to the poor financial condition of the company or simply because of rumours.
It is also important to help you predict whether the share price drop is temporary or will last a long time. This way, you can decide whether to sell (cut a loss) or keep holding (hold).
5. View your investment portfolio.
Good fundamentals, good technique. But not sure if you want to hold or sell? You can see what other portfolios you have, if the share price decline can still be offset by the profit you received from other stocks, then hold on.
However, you have to keep in mind that you have to set a deadline until you are still waiting for the stock price to rise again, according to NerdWallet data. It will take at least 13 months for the stock market to start recovering again after a prolonged downtrend.
Of course, this policy will be different if the company’s fundamentals are bad or you accidentally buy some fried stuff. If you buy a stock like this should be sold at risk of loss
Cutting losses are not always bad. And being owed is not always a good thing. Smart decisions from investors and traders are essential when stock prices drop dramatically.