On May 6th 2010, Dow Jones Industrial Average Index (DJI), S&P 500 Index (GSPC) and NASDAQ Composite (IXIC) suddenly collapsed and then rebounded rapidly.
Dow Jones Index (DJI) had the worst collapse. It lost 998.5 points within minutes only to recover most of the loss again rapidly.
This was the biggest intraday collapse of Dow Jones Index (DJI).
What had happened that caused this rapid collapse of these stock indexes wiping out trillions of dollars from the market.
After a lot of investigations SEC has released its inquiry report.
You will be surprised to know that SEC has blamed a UK home based trader Navinder Singh Saro of causing the market flash crash.
Criminal charges have been filed against this home based trader.
You can read in this blog post the detailed analysis of what happened on 6th May 2010 Flash Crash and the SEC Inquiry Report.
Flash Crashes have become frequent now.
The most recent one was the Pound Flash Crash that followed the same pattern.
GBP/USD crashed 1000 pips in a minute than recovered almost all the loss soon.
As a trader, you should understand what is causing these flash crashes.
Most of these flash crashes are being caused by a big bad trade placed by rogue algorithms.