Why are there flash crashes in the stock market but no flash rallies?

Discussion in 'Trading' started by helpme_please, Mar 3, 2018.

  1. Flash crash happened in 2010, 1987. As far as I know, there has been no flash rallies in stock market history. I wonder why this is so. Anyone has insights why there have been no flash rallies so far like the flash crashes that we have seen in 2010 and 1987?
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  2. eurusdzn


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  3. A forced liquidation is the answer... Over leveraging with margin in the options and futures market.
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  4. dealmaker


  5. dealmaker likes this.
  6. Kind of the same reason a fountain of gold or diamonds doesn't randomly sprout out of earth.
    Every-so-often, bad things need an outlet to release that built-up tension.
    You can kind of learn alot by just simple observation of the earth. and people. -- in relation to the market,
    , o_O
    Sometimes, life and in trading...is just a matter of perspective, to make a world...of difference,
    Be an ET, extraterrestrial trader -- not a caveman. in 2018,
    Last edited: Mar 3, 2018
  7. KevinD


    You'd really have to better define "flash crash" first of all. It seems to be a newer term to try and categorize something that doesn't fit the standard "crash" criteria. For instance, what was August 24th, 2015? That was certainly an outsized move with all sorts of pain for overleveraged specs, but I suppose it didn't all happen in the middle of the day, so it's excluded from the 'flash crash" designation.

    There have been far more one day "event's" in the past 30 years. You are forgetting many moves in 1998, a one day meltdown in the fall of 1997, an epic decline in April, 2000, the post 9/11/2001 debacle, meltdown's every other day in the fall of 2008 thru early 2009, etc, etc.

    I'd also argue there have been "flash rallies", but it depends upon how you would define them. Certainly numerous short squeezes that were basically vertical events at some stage. The problem is that most investors are positioned long, so a rally creates a different emotional reaction to a decline. The media views rallies as natural, declines as un-natural, so you have a different sort of labeling.
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  8. Fear of loss is a more powerful, action inducing emotion than the fear of missing out. Also most market participants are positioned long therefore stop losses which are essentially market orders are scattered below the bid and there's just not nearly as many buy stops scattered above the offers.
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  9. tomorton


    There have been 74 one day falls in the Dow over 5% since 1900, and 66 one day rises over 5% in the same period. I'm surprised the numbers are so close to each other.
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  10. Arnie


    Fear is stronger than greed.
    #10     Mar 4, 2018
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