Crash Response: 3 Things Not to Do and 3 Weekend Checks

TL;DR

• The costliest mistake after a plunge is doing something immediately. Most trading decisions on crash days are emotion driven.
• 3 things not to do: panic selling without a plan, averaging down without rules, betting on a rebound with leverage.
• 3 weekend actions are all checks: holding rationale, position structure, watchlist.

This week the KOSPI saw a +4.40% day and a -5.72% day in the same week. That kind of swing creates urgency to act, and that urgency itself should be checked.

3 Things Not to Do

1. Panic selling that was not in your plan

Selling on a crash is not inherently wrong. The problem is selling that was not part of the plan made when you bought. Selling because you hit a preset stop is principled, selling because the screen is red is reactive. They are different behaviors.

2. Averaging down without rules

"Buy more because it is cheaper" is only half right. If you had a staged buy plan and price reached the planned tranche, execute. If you add impulsively to erase losses, position management breaks. Before averaging down ask one question: would you have bought this stock at this price if it were the first time you saw it?

3. Betting on a rebound with leverage

After a crash, the next day can rebound or fall further. No one knows which will happen. One sure thing is that leverage amplifies that uncertainty. Increasing leverage in a higher volatility regime increases the stake, not the odds.

3 Weekend Checks

1. Is the holding rationale still valid?

Revisit the reasons you wrote when buying. If earnings, orders, or theme expansion still hold, the price drop did not erase the rationale. If the reason is gone and you are holding only because of price, that is the real issue. If you never wrote down your rationale, this weekend is a good time to do it.

2. Is your position structure survivable?

Most failures in crashes come from position sizing, not stock selection. If your account is concentrated in one stock or theme, a -5% day can feel like -10%. List weights by stock and ask yourself whether you can withstand the next crash with this structure.

3. Clean up your watchlist

Crash days reset many price tags at once. Check where your watched stocks stand and update your list. Registering on My Stock Radar delivers end-of-day briefings on changes. Updating the list is not a buy decision. Decisions come after rules and sizing are set.

The data a crash day leaves behind

Crash days leave data, not just emotions. Which themes fell less, where trading volume concentrated, whether rebound leaders held during the plunge. Over time those records become your personal benchmark in the next volatile phase.

Related reading

• News is late: 3 option data points big players see first
• Three indicators to gauge market temperature, VIX, 10-year yield, DXY

This article is for informational purposes and is not investment advice.