Rushing for the Exit

Wednesday, 28th October 2009 13:54 - by Boredmum

Okay, imagine that there is a ‘Sale’ advertised. This particular sale is absolutely amazing, great value for money. Some products are worth double what you will pay for them, some four times. In fact, some could be worth 10 times the sale price. The place quickly fills up, the capacity is more than it can handle, and all the ‘normal’ customers are there as well as everyone who has visited for the sale. An emergency happens, the alarm is sounded and everyone rushes for the exit. Trouble is this little old ‘store’ cannot cope with the amount of people it’s holding, so as they all rush for the exit at once only some get out...others are trapped! If you think this has nothing to do with shares then think again. Now this hasn’t happened to me for a long time, but it has happened. You buy into a share, the share price is quickly rising, and it could be rising for several reasons; possibly a false market created, inaccurate journalism or a misleading RNS. Any which way, everyone believes that something good is about to happen. As soon as it transpires those things possibly aren’t so great after all, then everyone decides to sell. That is when the trouble starts. You try to deal online and can’t get a quote, and you keep trying before deciding to call your Broker. It seems like a lifetime as you wait for your call to be answered, the whole time the share price is ticking down and down. You get through to your Broker and the reply is ‘No, I can’t get a firm quote either. We need to take it to market’. By the time they come back, you are offered a derisory price. You are either trapped or that wonderful ‘sale item’ you believed to be worth up to 10 times its value is suddenly only worth half the cost. Certainly something to think about when you are buying into a rising share price. This market has a way of turning...and turning fast. For me, this experience has made me something of a ‘nervous’ trader who quite often just comes out with a small profit or even at break-even when I don’t like the feel of how things are progressing.