A fast market is a market characterized by very heavy trading paired with high market volatility. This type of market can be dangerous to trade in for people who are not experienced investors, and even experienced investors can be taken by surprise in a fast market. A number of things can lead to the development of these kinds of market conditions, ranging from general economic trends to a specific event or announcement which has attracted media attention.
Fast markets can occur in a wide variety of markets, including stock exchanges, futures markets, and more general securities trading. One of the key characteristics of a fast market is sudden leaps in price over a very short period, with stock rising or falling radically rather than experiencing a more gentle upward or downward trend. Over the course of the day, these large jumps can translate into significant volatility. People who get caught on the wrong side of this volatility can run into trouble.
Classically, a fast market also develops market imbalances, in which there is an excess of buy or sell orders. Imbalances can depress or drive up the price of stock as people struggle to meet those orders, paying higher prices to meet buy orders and letting commodities go at low cost to accommodate sell orders. Imbalances can create opportunities for savvy investors, or leave others holding the bag.
In a fast market, brokers may require a higher margin from their customers, sometimes requiring an especially high margin for specific commodities or types of commodities. For example, if tech stocks are experiencing a lot of volatility in a fast market, a broker may feel that it would be safer to have a higher margin requirement for these stocks to ensure that its customers do not find themselves in trouble, and to avoid being left with the responsibility for covering clients who weren't prepared.
In addition to being important for investors, fast markets can also concern average civilians. Market volatility tends to alarm banks and other financial institutions, which can translate to higher interest rates, less available capital for lending, and other issues which can affect the lives of everyone. Market volatility can also contribute to broader economic issues, especially if a fast market is sustained over a long term. Heavy trading and a general upward trend, even if volatile, are generally viewed as positive, for example, but they can set people up for a heavy fall which may create a ripple effect.
