This year on October 19th is the 30th anniversary of the worst stock market crash in the history of it. Referred to as “Black Monday” it was a day that made a lot of people lose their minds. This anniversary is certainly not jovial though, it is full of loss and despair. The Dow plummeted 508 points on October 19th, 1987, making it the worst day in stock market history according to Mark Skousen. No one saw it coming.
The market was fluctuating a lot, and hit a peak about two months earlier. There was also single day spikes that happened every once in a while. When the opening bell hit the market averages were down and many of the stocks did not open at all for several minutes. As soon as they opened the specialist raced to match the orders with buyers. Phone lines were lit up like a Christmas tree as stressed out clients called in. People could see the progression of the stress turn from nervousness to full blown insanity. The weirdest thing that perplexed everyone was that there was not particular thing that created it. The computer programs were acting really wonky. They are suppose to reduce loss with a little help from options and futures, but instead were compounding loss upon loss. It started a vicious cycle that seemed to go on forever. Since then there has been some changes, but that doesn’t mean there aren’t flash crashes.
On May 6, 2010 there was a flash crash that had the market revise the circuit-breaker rules. August 24, 2015 the Dow dropped 1,100 points within five minutes of opening. China experienced a drop at almost the same time in Europe, just before the United States market opened. There was yet another flash crash for bonds on October 15, 2014. The market dropped 35 points in a few minutes. It was blamed on high-frequency algorithms that are automated. These flash crashes are nothing new, but can be prepared for. It is important to anticipate them and prepare, not react emotionally to them. Save a little cash on the side so you won’t be caught up a creek without a paddle. These flash crashes are unpredictable, and no one known when they will happen.
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