Home > Store

Shock Markets: Trading Lessons for Volatile Times

Register your product to gain access to bonus material or receive a coupon.

Shock Markets: Trading Lessons for Volatile Times


  • Sorry, this book is no longer in print.
Not for Sale



Powerful trading strategies and tactics for profiting from increasingly volatile markets: real example trades and actionable information! 

  • You can't predict stock market shocks -- but you can trade and profit from them while they're happening!
  • Discover potential profit opportunities associated with trading catalysts ranging from earnings announcements to mergers, lawsuits to regulatory action
  • Contains meticulous moment-by-moment analysis of important recent shocks -- and real, actionable lessons
  • How to adapt to today's volatile markets, and devise a trading plan to take advantage of them


  • Copyright 2013
  • Edition: 1st
  • Book
  • ISBN-10: 0-13-233795-9
  • ISBN-13: 978-0-13-233795-3

Don't fear crises: use them as opportunities to make money! Shock Markets shows traders and investors exactly how to do it -- with exceptional detail, not vague handwaving. Robert Webb and Alexander Webb offer meticulous breakdowns of recent crises, revealing how they impacted both individual stocks and the market as a whole -- and helping you create detailed game plans for profiting from future shocks. By fusing real-life trading examples with rigorous moment-by-moment analysis of price changes, they give you tools to survive and thrive in even the most volatile markets. This accessible, actionable book answers crucial questions like: What moves stock prices? What moves the overall market? How can you profit from understanding catalysts that precipitate sudden sharp changes in stock prices? From the actions of corporate executives to regulatory decisions, earnings announcements to merger deals, lawsuits to settlements, macroeconomic reports to the policy actions of foreign governments, seemingly remote factors can have a huge, sudden impact on stocks in today's interconnected markets. Shock Markets illuminates these catalysts, and demonstrates their shifting behavior during fads, fashions, bubbles, crashes, and market crises. The focus is completely practical: helping savvy traders uncover profit where others find only peril.


Companion Site

Please visit the site associated with Shock Markets: Trading Lessons for Volatile Times: www.shockmarkets.com.

Sample Content

Online Sample Chapter

The Nature of Trading in Volatile Times

Sample Pages

Download the sample pages (includes Chapter 1 and Index)

Table of Contents

Chapter 1  The Nature of Trading      1
Why Study Market Shocks?     2
The Nature of Trading      3
Different Perspectives of Trading      4
Market Conditions and Sentiment     7
Making Trading Decisions     8
Looking Ahead     9

Chapter 2  Five Simple Questions     13
Which Market(s)?     13
Which Direction?     16
   Bear Stearns     17
   The Market Reacts to the Employment Report     22
   Trading Lessons     28
How Much?     28
How Long?     30
   The Market Reacts to the Fed     30
   The Market Reacts to the November 2012 Employment Report     32
   How Quickly? Mad Cow Disease     34
   How Quickly? CME Group Stock Price     35
How Risky?     36
A Sixth Question     38
Additional Trading Lessons     39

Chapter 3  Fads, Fashions, and Bubbles     43
Is It Really a Bubble?     44
Can You Profit from “Bubbles”?     48
Is the Market Smart?     51
   Market Efficiency     53
   Irrational Speculation and the Limits of Rational Analysis     54
   Irrational Pricing     57
Trading Lessons     59

Chapter 4  Earnings and Corporate Announcements     63
Earnings     63
   Google     64
   Apple     66
   Facebook and Zynga     67
   Sudden Drops     70
New Products—Videogames     71
Mergers and Acquisitions     76
   Anatomy of a Deal: Bank of America and Countrywide Financial     76
   Quaker Buys Snapple     79
   Merrill Buys FRC     80
   Deals That Fail     81
Changes at the Top     82
   RIMM Shot     82
   Best Buy     83
   Wellpoint     83
Regulatory Actions and Lawsuits     84
Trading Lessons     85

Chapter 5  Rumor Has It     95
Rumors     96
   United Airlines Takes a Nosedive     96
   Nokia Misdials     98
   Hyundai Motors     100
   HBOS     100
   Steve Jobs’ Health     102
   Audience Inc.     102
Position Announcements     103
   “The Oracle of Omaha”     103
   David Einhorn     104
   Carl Icahn     105
   Muddy Waters     105
Shorted Companies Bite Back     106
Trading Lessons     107

Chapter 6  Political Economy     113
Political Shocks—Terrorist Actions, Wars, Assassinations, and Policy Actions     114
The 2000 U.S. Presidential Election     115
Expropriation     116
Cooling the Economy and Markets     120
Central Banks to the Rescue     121
Central Banks as Speculators     124
   The Swiss National Bank     124
   The Bank of Japan     125
   Bank of England     128
   Bank Negara Malaysia     129
   Trading Lessons from Central Bank Interventions in the FX Market     129
Trading Lessons     131

Chapter 7  Predatory and Insider Trading     139
Predatory Trading     140
   Porsche as a Hedge Fund     140
   Whales in Trouble     144
   It Only Takes a Moment     149
Speculative Attacks—“If at First You Don’t Succeed...”     150
LIBOR     152
Gunning for Stops     153
Informed Trading     154
   Puts on Bear Stearns     155
   Dow Jones & Company Stock     156
Trading Lessons     157

Chapter 8  Crashes, Trading Glitches, and Fat-Finger Trades     163
The May 6, 2010 “Flash Crash”     163
   Trading Lessons     167
   Other Flash Crashes     168
October 19, 1987 Stock Market Crash     169
Other Stock Market Crashes     174
Fat-Finger Trades     176
Trading Glitches     177
   Trader Errors: “Algos Gone Wild”     178
   Interruptions of Trading on Exchanges     179
   Trading Glitch Case 1: The Tokyo Stock Exchange Suspends Trading     183
   Trading Glitch Case 2.A: The TSE Fails to Cancel Clearly Erroneous Trades     183
   Trading Glitch Case 2.B: The TSE Fails to Cancel Clearly Erroneous Trades     184
   Trading Glitch Case 3: The TSE Suspends Trading     185
Trading Lessons     186

Chapter 9  Man Versus Machine     191
Algorithmic and High-Frequency Trading     192
   Old Strategies     193
   New Technology     196
   “New” Strategies     198
   Ramifications     200
Avoiding HFT     206
Trading Lessons     207

Chapter 10  Flight to Safety     211
Reducing Risk     211
Credit Default Swaps     212
Nature of the Crisis     217
Gold     218
Treasuries     224
Currencies     225
The Paradox of Wealth Preservation     227
What Is Safe?     228
Trading Lessons     229

Chapter 11  Why Most Traders Lose Money     233
The Banks     234
Behavioral Finance     236
   Overconfidence     237
   Risk Aversion     237
   Loss Aversion     238
   Disposition Effect     238
   Mental Anchoring     238
   Heuristics Not Statistics     239
A Tale of Two Losses     240
Warren Buffet and EFH Bonds     241
Trading Lessons     243
   Failure to Cut Losses Short     243
   Failure to Let Profits Run     244
   Failure to Listen to the Market     246
   Confusing Trade Conviction with Trade Retention     246
   Excessive Leverage     247
   Trade Size Is Too Large     247
   Trading Too Frequently     248
   Would You Rather Be Right or Rich?     249
   Failure to Have a Viable Trading Game Plan     249
   Failure to Follow a Viable Trading Game Plan     249
   Remaining in a Trade After the Reason for Entering the Trade No Longer Exists     249
   Good Trades That Lose Money Versus Trading Badly     250

Chapter 12  Developing a Trading Game Plan     255
Trading Edge and Trader Type     255
   Trading Edge     256
   Trader Types     256
Trading Thesis     257
Making a Trading Game Plan     257
   Trading Thesis and Trade Identification     257
   Trade Selection     258
   Choice of Security     259
   Size     259
   Trade Horizon     260
   Risk Control—Stops     260
   Crowded Trades     261
   Correlated Bets     262
   Risk On/Risk Off Markets     262
   Trade Execution     262
Trade Monitoring and Contingency Plan     263
Trade Completion and Evaluation     264
The Message in the Behavior of Market Prices     265
Trading After a Market Shock     265
Shocks: Scheduled and Unscheduled     266
Trading Maxims     266
   Control Yourself, Because You Can’t Control the Market     266
   Get Prepared to Play, Don’t Play to Prepare     267
   Limit Risk—Not Reward     267
   Learn from the Past—Don’t Live in It     268
   There Are No Martyrs in the Market— Only Casualties     269
   Don’t Bet More Than You Can Afford to Lose     269
   Hope Is Not a Plan     269

Index     271


Submit Errata

More Information

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020