October 19, 1987 - Black Monday 26 Years Later: Could It Happen Again? | The Future Tense On this day 26 years ago the U.S. stock market fell over 22% in a single trading day. This was the largest one day fall in stock market history (by far). Could it happen again? A specific cause of the crash was never determined, but many investors believe that it was due in large part to a new trading strategy called portfolio insurance. Automatic sell orders were set up to protect investors against losses should the market begin to fall. As the drop began, the portfolio insurance sell orders were triggered every step along the way causing a cascading collapse. In todays market, not only is that danger still there, it is far worse because of the use of high frequency trading. These machines, which dominate close to 70% of the trading in the markets on a daily basis, have the ability to turn off and walk away when things get troublesome. This was seen during the flash crash in 2010 when the DOW fell 1,000 points in a few minutes. ftense/2013/10/october-19-1987-black-monday-26-years.html
Posted on: Sun, 20 Oct 2013 01:02:09 +0000
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