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I would like to know what were the differences of trading US equities during the credit crunch era from someone who had a pertinent experience, since I was a high school kid back then and now I'm an adult trader.

  • How big was the increase in slippage and the bid/ask spread ?
  • What was the delay you have experienced after posting a 'sell' bid in terms of executing your order?
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  • Apart from some big movement days most days during that period traded just like any other day when stock prices were moving upwards. When the market moves down quickly it is the same as days in which the price moves up quickly, just the reverse.
    – Victor
    Commented Oct 28, 2018 at 8:44
  • why did you specify long-term stock holdings? Many people with long-term stock holdings did nothing during the downturn. Commented Oct 28, 2018 at 12:08

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Liquid stocks that trade millions of shares per day are rarely a problem when the market is under duress. Exceptions are usually one day events like Black Monday in 1987 or single issue stocks where there is significant news such as failure of clinical trials, cooking the books (Enron), earnings announcements, etc. In such cases, the B/A spread can widen significantly but it narrows in a reasonable amount of time.

When such volatility of duration occurs, you'll see a more pronounced effect in illiquid stocks. The B/A widens dramatically and this was the case in 2008-2009. The offset is that the increased then volatility created an opportunity to trade these issues because on many days it was a fast market.

I traded illiquid financial stocks heavily then. At times I was the bid and the ask, willing to sell what I owned or buy more (or conversely, willing to be short more shares or buy to close what I was short). Although it's hard to believe, sometimes I was filled on both orders in a matter or minutes. And although it's anecdotal, in fast markets, people place 'fat fingered' trades when in a rush to execute. I can vouch for this because 'Been there, done that'. During a fast market, fills at inexplicable prices occur more often while rarely, if at all, during normal markets.

In 2008-2009, there was no delay in execution if you were hitting the bid or the ask. At times, the problem was where price was at any given moment. For your typical long or short investor/trader, that's not a problem since you have a target price and if price gets there, your limit order is executed. I was running a long/short portfolio for myself so an execution on one side required an action on the other side and that is tricky in a fast market.

There's was never a problem selling a stock in 2007-2009 other than for short sellers in Sep 2008 when the SEC banned the shorting of 800 financial stocks. The question was whether the price available was acceptable for your selling of long positions or shorting.

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