Back on October 19, 1987, the Dow took a downward spiral and plunged 508 points, which was equivalent to 22.6%. On that historic morning, the market norms broke down at the inaugural bell. At that moment, there was tension, as many stocks could not open for a couple of minutes. It was chaotic as the specialists fought back to match buyers with sell orders. The phones were ringing with calls from panicking clients.
This horrifying event was uncalled for since no particular event triggered it. Fortunately, the currency did not collapse nor did the government fail, and equities were not overvalued. What triggered the event was a sudden rush of computer-driven program trading. Trade managers have come up with solutions to overcome these rushes although the crashes still happen.
For example, in August 2015, the Dow dropped approximately 1,100 points barely five minutes of trading. The crash was sparked by China’s drop in the market. This shook the Europe and the U.S market.
When instances like these happen, it is advisable for the investors to remain calm and not react emotionally. When the market is doing well, it is good to emphasize quality, do asset allocation, and broaden your horizons to get some good returns.
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