Panic
Sudden emotional reaction leading to unthinking sell decisions.
Beginner-friendly explanation
Panic in trading is when fear of losing money makes you sell quickly, even if it’s not the right time. It’s an impulsive reaction that often causes bigger losses.
Example:
You see a token price drop fast. You panic and sell. An hour later, it rebounds: you sold at the worst moment.
Intermediate-level insight
Panic is a strong emotional response to sharp market drops. It drives irrational decisions: rushed selling, moving stops, abandoning strategy. Panic phases often trigger overreactions and quick technical rebounds.
Example:
After an unexpected news event, BTC drops 15% in minutes. Many traders close positions blindly, accelerating the fall.
Advanced perspective
Panic is driven by cognitive biases (loss aversion, urgency heuristics) triggered by extreme volatility. It causes major order book imbalances (sell walls), high slippage, and cascade liquidations (snowball effect). Advanced strategies include anti-panic mechanisms: alerts, pre-set protocols, algorithmic management.
Example:
A flash crash wipes 30% off ETH. Chain reactions trigger a selling spiral. Well-programmed algos avoid panic stops and buy at a discount.
Psychology & Behavior
panic, fear, rushed selling, stress, emotion, crash, cognitive bias, volatility, slippage, liquidations