Posted in Finance, Accounting and Economics Terms, Total Reads: 539
Definition: Fast Market
Fast Market is a market situation that is characterized by very high price volatility and large trading volume in some or all of the securities listed on the market. It is most common in the area of options trading.
Fast market is usually a rare phenomenon and occurs only in case of some very new information entering the market. A possible situation could be when a high-expectations company files for an IPO and the market jumps onto the offer. On the other hand, fast market situation is also possible when firm-level or country-level negative news hits the market.
Usually investors typically tend to lose money in a fast market as their orders do not get executed at their quoted rates. This is because brokers don’t get access to exact underlying price, volume, last sale and other market information because of the delay caused by volume of trade. Data is updated as fast as possible but it may not be without errors. Hence investors end up buying at higher prices and selling at lower prices as against their quote. This is the reason investors use stop-loss orders in a fast market so as to keep trading quotes at their permissible levels.