DEFINITION of 'Sell-off'

A sell-off is the rapid and sustained selling of securities at high volumes that causes a sharp drop in the value of the traded securities. Sell-offs most commonly occur with liquid assets such as stocks, bonds, currencies and commodities. Unexpected adverse news can spark a sell-off, as can a market rumor, and the sell-off will continue until the selling action becomes exhausted or when the market believes that the value of the asset has readjusted to fair value. In the case of a market rumor, if proven false, the sell-off typically reverses course, sometimes in a matter of minutes.


A sell-off of a security can occur at any moment as long as the market for trading the security is open. In the case of currencies and commodities that are traded around the clock, a U.S.-based trader may wake up in the morning and find out that there was a sell-off in the Japanese Yen or Brent crude oil. Stock trading is bound by market hours, although in certain markets, pre-market and post-market trading takes place. If negative news relevant to a particular company or asset class hits the market, a sell-off of securities may ensue.

Consider the following situations that may cause a sell-off:

  • After market close, a company gives sharply lower earnings guidance for the current fiscal year. In after-hours trading, there is a steep sell-off of the shares of the company.
  • During market trading hours, a news report quickly spreads that customers of a restaurant fall ill to E. coli from consuming its food. The stock of the restaurant chain sells off, as the market now believes that earnings of the company will be severely impacted.
  • A higher-than-expected inflation report is released in Germany, which triggers a sell-off in German bunds.
  • China surprises the global market by providing a gross domestic product (GDP) growth rate forecast that is well below expectations. A major sell-off in many basic commodities takes place.
  • A rumor during market hours that a company is about to announce a highly dilutive acquisition prompts a sell-off. However, the company releases a statement that no such talks with the alleged target have taken place, and the stock quickly makes a u-turn and heads back up.
  1. Sell-Off

    A sell-off is rapid selling of securities, such as stocks, bonds ...
  2. Liquidating Market

    Liquidating market is when a large group of investors all initiate ...
  3. Sellout

    A sellout occurs when a broker or investor buying stocks has ...
  4. After-Hours Trading

    After-hours trading refers to the buying and selling of securities ...
  5. Average Daily Trading Volume - ...

    The Average Daily Trading Volume (ADTV) is the average amount ...
  6. Limit Down

    Limit down is the maximum amount by which the price of a commodity ...
Related Articles
  1. Investing

    A Stock Sell-Off Vocabulary Guide

    When stocks sell-off, a whole bunch of new financial terms start popping up. Here's our cheat sheet.
  2. Investing

    Enjoy 2017 Market Growth, But Be Prepared for Correction

    A look back at three quarters of market growth in 2017 and a word of advice for the future.
  3. Investing

    Swallowing a Market Selloff

    After an intense three week rally to start the year, markets are selling off causing investors to question their fortune.
  4. Insights

    Sympathy Sell-Off: An Investor's Guide

    Find out how to tell whether your stock is a bargain or a bank breaker.
  5. Investing

    Training your Mind in Volatile Markets

    Volatility is a tricky animal, and it behaves differently when markets are under pressure. That's happening now. 
  6. Investing

    Why Stock Market's Big Rally Won't Last

    The rebound may be a prelude to more plunges - and more volatility - in 2018
  7. Trading

    As Markets Drop, Active Traders Focus on Commodities

    Strong chart patterns for key commodity-related ETFs suggest that this could be one of the only segments to withstand a continued sell-off.
  8. Investing

    Fidelity Investments' Timmer: Valuations Still Need to Come Down

    Fidelity Investments' director of global macro thinks valuations still need to come down, despite the recent sell-off.
  9. Trading

    Trading in the Pre- and Post-Market Sessions

    Pre-market and after-hours trading may offer benefits for traders, but there are some potential problems.
  10. Trading

    Energy Stocks Could Enter Bear Market

    Energy stocks could sell off in sympathy with crude oil, which has just reversed at long-term resistance.
  1. Why would my stock's value decline despite good news being released?

    There are many possible explanations for a stock's value declining despite good news being released. Investors should remain ... Read Answer >>
  2. What are the safest investments during a bear market?

    Learn what investments carry the least amount of risk during a bear market and how they can be used to hedge against falling ... Read Answer >>
  3. Common examples of marketable securities

    Learn about marketable securities and the most common types of debt and equity securities, including common stock, bonds ... Read Answer >>
Trading Center