Navigating Unusual Stock Market Transactions

In the world of Stock market the occurrence of freak trade can happen which shake up the market and leave the investor puzzling. so let try to understand what is freak trade and why does it happen.

What is Freak Trade ?

Freak trades, also known as "fat finger trades" or "flash crashes, refer when the trade occur at a unusual price often significantly different for the prevailing price in the market. These trade typically occur within very short timeframe and can involve in large volume.

Cause Of Freak Trade

• Human Error - It is one of the common cause of freak trade where the person misput the input. For example When the trader intend to buy or sell a stock of a certain quantity but accidentally enter a higher or lower value number.
• Market Volatility - During period of high volatility or significant news event market participants may react impulsively, leading to panic selling or buying

For example, in October 2012, a trader created high volatility in the stock market after mixing up the volume and price columns. The mix-up triggered a massive sell order of Rs 650 crore worth of NIFTY stocks and sparked a drop of 15% in the value of NIFTY within several minutes of placing orders.