 "Tipping point: What are flash crashes and why do they occur?")
What is a flash crash?
A flash crash is a very rapid, deep and volatile fall in prices of stocks within an extremely short period. On Monday, when US stocks witnessed a sudden plunge, many experts called it a ‘flash crash’. Even in India, a flash crash has happened a few times. In October 2012, the market plunged 15.5 per cent within a few minutes causing havoc amid investors.
Why do flash crashes occur?
A flash crash, usually, happens due algorithmic trades and high-frequency trades. In such situations, computers with a pre-programmed logic automatically take decisions to buy and sell. The speed and interconnectedness of the setup can result in the loss of billions in a matter of seconds or minutes.
A flash crash is a very rapid, deep and volatile fall in prices of stocks within an extremely short period. On Monday, when US stocks witnessed a sudden plunge, many experts called it a ‘flash crash’. Even in India, a flash crash has happened a few times. In October 2012, the market plunged 15.5 per cent within a few minutes causing havoc amid investors.
Why do flash crashes occur?
A flash crash, usually, happens due algorithmic trades and high-frequency trades. In such situations, computers with a pre-programmed logic automatically take decisions to buy and sell. The speed and interconnectedness of the setup can result in the loss of billions in a matter of seconds or minutes.
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