Freak Trades

Freak trades are rare and abnormal stock market occurrences that leave traders puzzled and often concerned. These trades take place at prices far removed from the prevailing market rates and are typically triggered by unforeseen factors such as technical glitches, manual errors, or low market liquidity. For traders, understanding freak trades is essential to navigating the complexities of the financial markets.

Freak trades refer to transactions in the stock market that occur at prices significantly different from the prevailing market rates. These trades are often the result of anomalies such as technical glitches, fat-finger errors, or a lack of liquidity in the market.

For instance, a stock trading steadily at Rs. 500 might suddenly execute a trade at Rs. 50 or Rs. 5,000. While rare, these occurrences can have significant implications, especially for traders who rely on stop-loss orders or automated trading strategies.

Freak trades can have a direct impact on stop-loss market orders. A stop-loss order is designed to limit a trader’s loss by automatically selling a stock when it reaches a predetermined price. However, during a freak trade, the price of a stock can abruptly drop or spike, triggering the stop-loss order at an unfavourable price.

For example, if you set a stop-loss order to sell your stock at Rs. 495, a freak trade might cause the stock’s price to momentarily drop to Rs. 100, leading to the execution of your order at this unexpected price point.

To minimise such risks, traders can use advanced stop-loss strategies and tools available on platforms like Bajaj Broking. These tools allow you to set conditional triggers and monitor real-time market movements, ensuring better control over your trades.

Freak trades occur due to a combination of factors, including:

• Technical glitches: Errors in trading platforms or stock exchanges can lead to price mismatches.
• Fat-finger errors: Manual mistakes, such as entering the wrong price or quantity, can result in abnormal trades.
• Low liquidity: In markets with limited buyers or sellers, even small trades can cause significant price fluctuations.
• Algorithmic trading: Automated trading systems may execute trades based on flawed logic or erroneous data, contributing to freak trades.

A fat-finger trade refers to a manual error made by a trader when entering an order. This could involve typing an incorrect price or quantity, leading to unintended and often significant market consequences. For example, a trader intending to sell 1,000 shares at Rs. 500 might accidentally enter an order to sell 10,000 shares at Rs. 50.

Such errors can disrupt market equilibrium and lead to freak trades.

Freak trades, while rare, can have a profound impact on traders and the overall market. Understanding their causes—whether technical glitches, fat-finger errors, or low liquidity—is crucial for mitigating risks. By adopting proactive strategies and leveraging advanced trading tools, you can navigate these anomalies with greater confidence.

Investments in securities markets are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future returns. Bajaj Broking does not provide investment advisory services.