The Results of the Poll.
In reaction to the poll that I posted on Friday, A lot of people answered (in my opinion) incorrectly.
💬 The question was: “Is it considered a “Crash” when the price of an asset declines?”
The answers were:
A Yes, it’s a crash (A whopping 67% chose this ❎)
B Nope, don’t trust them
C I…. Have no clue
D It’s not that simple (Only 33% chose this ✅)
Why is this Important?
📍When trading, a single aspect overlooked can be the difference between profit and loss, I hope this will been useful to some of you.
The Answer.
🟢 If you continue to read further you will see the answer is in-fact D, Or even B. As most things in trading it boils down to your perspective but there are always general "rules" that we all use to define patterns, trends, candlesticks etc.
As most people tend to use it incorrectly in their posts on Binance Square I'd like to shed light on this for those still new, and hopefully for you to not fall into fear traps and to spot which posts to be taken with a grain of salt and not blindly trusted.
Conclusion.
The time and amount of the decline and the reason are the most important factors to define a crash. Time being sudden (without warning or opposing any graph analytics or clear indicators). The amount being greater than 10% (most recourses state around 20%). And the reason usually being out of fear or loss of interest/loss of demand.
The Proof.
Below is some (there are more recourses, but I will not re-post the entire internet) clarification on the answer for the poll:
💬 “Although there is no specific threshold for stock market crashes, they are generally considered as abrupt double-digit percentage drop in a stock index over the course of a few days…”
📚 (Investopedia, Guide to Stock Market Crashes, James Chen, January 02, 2022)
💬 “A stock market crash is a sudden and dramatic drop in the value of stocks listed on an exchange. Many factors can cause such a drop, including economic or geopolitical events, rumours or compounding herd behaviour.
Stock market crashes are frequently confused with market corrections, but there are specific thresholds for each. A stock market crash refers to a drop of 20% or more from a recent high, while "correction" refers to a drop of 10% or more.”
📚 (USNews Money, Market Crash Definition, Jenna Inouye, December 8, 2023)
💬“A crash is a sudden and significant decline in the value of a market. A crash is most often associated with an inflated stock market, though any market can crash, for example, the international oil market in 2016. In the U.S., a crash is determined by a precipitous drop in the value of market indexes, primarily the Dow Jones Industrial Average (DJIA), the S&P 500, and the Nasdaq.”
📚 (Investopedia, Crash: What it Means, How it Works, Will Kenton, November 26, 2021)
💬“A stock market crash is a rapid and steep decline of stock prices that happens unexpectedly. While there is no defined numerical figure, a typical stock market crash will result in losses of over 10% within a couple of days…”
📚 (Avatrade Education Material, What is a Stock Market Crash?)
