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Can anyone say why this momentary "flash crash" was a big deal? Who cares if people or computers trade securities under market value for a short amount of time?

• nl 16y ago
  Who cares if people or computers trade securities under market value for a short amount of time? It only affects the idiot that is selling them at that undervalued price. The value of the underlying company is unaffected and market forces will always quickly correct it. Well, the stock price is the market value - if it's not then what is? Detecting errors as opposed to genuine changes in value is a non-trivial problem. Use buy and sell limit orders, you should be already. The flash crash happened so quickly that a lot of limit orders weren't executed, because the price dropped past the limits too fast. If you had an order to sell something at $20, and the price dropped from $25 to $1 in seconds then there's a good chance there were no buyers for you at $20, but instead your trade might have been executed at $1. That makes a pretty big difference.
  • yummyfajitas 16y ago
    A limit order sell at $20.00 will never be executed at $1. It will never even be executed at $19.99. It will simply go unfilled until someone is willing to sell at $20.00 or higher.