Glossary Term

Flash Crash

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When a flash crash occurs, prices fall quickly, abruptly and unexpectedly in a very short time-span and then rebound. These crashes are rare and the reasons behind them vary in nature and are often the epicentre of debates between market analysts. One of the main flash crash drivers is human error. Traders deal with a lot of zeros and decimal points and one more zero could cause the market to crash. In a similar vein, computer errors and software glitches can cause a flash crash as most of modern-day trading depends on computers and trading platforms. Last but not least is high-frequency trading, a practice where automated algorithms execute trades at ultra-fast speeds, increasing the likelihood of computer error and an eventual crash.

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What is Flash Crash? A Traders Expert explanation.

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