>> poorly programmed algorithms You're describing the stop-loss orders that non-professionals use to protect themselves from losing money when the fundamentals

>> poorly programmed algorithms You're describing the stop-loss orders that non-professionals use to protect themselves from losing money when the fundamentals of their companies deteriorate suddenly. A stop loss is a very simple algorithm that is widely available in retail brokerage platforms. (Example stop-loss order: "Sell when the last trade is 3% below my purchase price.") For instance, you own 100 shares of Pepsi and plan to hold for a while (years, not days). Tomorrow while you are in a meeting, a large-scale accounting fraud at Pepsi is announced, sending the stock down some large %age before the circuit breakers halt the stock. Prudently, you had a stop-loss order limiting your losses to (say) 3%. In this case, the stock probably won't recover when the stock starts trading again. If the stock had dropped and suddenly recovered due to a non-news flash crash, you would have just lost 3% of your investment for no fundamental reason. The flash crash in essence caused you sell at a localized bottom.