## **Black Monday, 30 anniversary of biggest daily market crash in history**

Exactly 30 Years ago, October 19th 1987 my parents were celebrating my 5th birthday. It's a day that I don't remember well, maybe just a few vague memories.

Beside me and my small family, that day was not a day to celebrate. As a matter of fact, it's a day that traders and investors fear the most, and they often refer it as Black Monday. That day, starting with Hong Kong and Australia, followed by Europe season and ending with US, market crash the most in a single day. Hong Kong and Australia crashed 45.5% and 41.8% respectively while Dow Jones industrial average crashed 20.5%. The most was hit New Zealand with 60% crash from its 1987 peak. Many funds went bust that day and many people lost everything they had.

Shortly after, markets started to recovered. Within two years DJI reached the new all time high. The memory of that day still remains, its the black swan event that every trader fears the most.

https://i.imgur.com/IfktzG5.png
Chart source: www.tradingview.com

## **We are swimming in the same waters**

30 years from now, we are swimming in the same waters. Markets are at all time high and low volatility. As a matter of fact, all time highs, are getting reached every second day. It's not a big thing anymore.

Markets sentiment is no difference either. Beside experienced traders, it seems like  every trader seem to believe that markets will never go down again. Most of them were not around during 2008 crash, let alone 1987. 

https://i.imgur.com/S0xJ3ZV.png
Chart source: www.tradingview.com

## **Causes of black monday flash crash**

After the crash, investors started to study it and find the real cause. Markets are to complicated to have a single cause, but possible causes are program trading, overvaluation, illiquidity and market psychology. The main cause was program trading (or algorithmic trading as we like to call it now). 1987 was the early days for computer trading.

Today algorithmic trading, often called high frequency trading, rule the markets with at least 80% of trading volume. 1987 trading programs were simple. Today is a whole different world, self learning machines are making trades. They no longer run with a simple script. If the market crashes, it will be even harder to find out why machines started to sell. Not even their makers  will know the reason, since machines teach themselves. 


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**Disclaimer:** The information contained herein is not guaranteed, does not purport to be comprehensive and is strictly for information purposes only. This is not a financial advice. It should not be regarded as investment/trading advice.