Skittish Market

AAA

DEFINITION of 'Skittish Market'

An investment climate marked by skeptical investor behavior. A skittish market might occur following a significant downturn, when the market appears to have recovered but investors remain fearful and hesitant to buy in because they either don't believe that economic conditions have really improved or because they are afraid of the next downturn and want to avoid it by staying out of the market.

INVESTOPEDIA EXPLAINS 'Skittish Market'

Investors who get carried away by current market conditions and allow their emotions to influence their behavior more than the numbers tend to act irrationally and against their best interests. To overcome the tendency to buy when the market is up and sell when it's down, successful investors like Warren Buffett recommend choosing stocks that are momentarily underpriced compared to the underlying value of the company and holding those investments for the long term.



RELATED TERMS
  1. Bull Position

    A long position in a financial security, such as a stock in the ...
  2. Sucker Rally

    A temporary rise in a specific stock or the market as a whole. ...
  3. Lemming

    The act of an investor following the crowd into an investment, ...
  4. Herd Instinct

    A mentality characterized by a lack of individual decision-making ...
  5. Rally

    A period of sustained increases in the prices of stocks, bonds ...
  6. Head-Fake Trade

    A trade where a stock or market appears to be making a move in ...
RELATED FAQS
  1. How does days to cover a short position relate to a short squeeze?

    Days to cover a short position reveals the intensity and duration of a potential short squeeze. A short squeeze occurs when ... Read Full Answer >>
  2. Is it better practice to use a stop order or a limit order?

    Both stop orders and limit orders have their advantages and disadvantages; traders need to decide between the two based on ... Read Full Answer >>
  3. What is the difference between a buy limit and a sell stop order?

    A buy limit order is a specific type of buy order used to enter a market, while a sell-stop order is a sell order that can ... Read Full Answer >>
  4. What is the difference between a short squeeze and a long squeeze?

    A short squeeze and a long squeeze are situations that can force traders and investors out of their positions. A short squeeze ... Read Full Answer >>
  5. Why does the efficient market hypothesis state that technical analysis is bunk?

    The efficient market hypothesis (EMH) suggests that markets are informationally efficient. This means that historical prices ... Read Full Answer >>
  6. What does it mean to be absolutely risk averse?

    Some people are absolutely risk-averse, which means that they cannot tolerate sustaining any sort of loss, even a temporary ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  2. Investing

    Tips For Investors In Volatile Markets

    Find out what to look out for when trading during market instability.
  3. Trading Strategies

    How To Avoid Emotional Investing

    Most investors buy high and sell low, but you can avoid this trap by using some simple strategies.
  4. Options & Futures

    Market Problems? Blame Investors

    Investors are only human, and their irrational behavior can often move the market.
  5. Active Trading Fundamentals

    Leading Indicators Of Behavioral Finance

    Discover how put-call ratios and moving averages can be used to analyze investor behavior.
  6. Trading Strategies

    Why Volatility Is Your Friend

    Instead of looking at falling share prices as something negative, investors should view it as an opportunity to acquire ownership in fundamentally strong companies at low prices.
  7. Professionals

    Characteristics Of Successful Traders

    Successful traders share psychological characteristics that augment their personal and financial power.
  8. Active Trading

    Twitter and Stock Trading: A Real Strategy?

    Is it really a profitable strategy to look at the number of tweets about a stock as an indicator to help you decide to buy/sell a stock?
  9. Investing Basics

    Gain The Needed Insights To Spot Stock Pick Scams

    Uneducated traders are often ensnared by "hot stock pick" scams, but educated traders use key insights to make well-timed trade entries and exits.
  10. Economics

    Buy and Hold: Comfortable, But Mind the Risks

    Don't let the comfort of buying and holding blind you into hurting your portfolio.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!