We all know Black Friday, the start of shopping season. But do you know Black Monday?
Black Monday occurred on Oct. 19, 1987, the Monday that a stock market crash happened out of blue. On that day, the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. It was the beginning of a global stock market decline.
Within 6.5 hours, the main index in New York lost $500 billion, which is almost one-eighth of the US’s annual GDP. This disaster shocked the entire financial world, producing a domino effect in the world’s stock markets.
It caused huge panic among the shareholders in western countries. Many millionaires became poor overnight. Thousands of people committed suicide. This day was called “Black Monday” by the financial community, and the New York Times called it “the worst day in Wall Street history.”
However, the cause of Black Monday is mysterious. No major news event was released, everything seemed quite normal. Many people tried to explain with the psychologies of herd instinct, efficient market hypothesis or economic imbalance. For example, the trade deficit of the US with other countries. The most recognized explanation after the stock crash is program trading.
Computerized trading, or program trading, meaning that you write a program in your computer, and the program can judge the stock market, help you buy and sell stocks. After the stock market disaster, many people said that the when they saw saw the stock price fall in the computer, they added the selling of stocks according to the mechanism set in the program, forming a vicious circle, which caused the stock price to fall faster.
There is no clear answer of the debate till today.
We can learn a lot from Black Monday. Being an investor, we should always remember to spread risks. Also, we should stick to our strategy and don’t listen to the noise that will distract us. Believe in ourselves. Stock market is changing every minute. Hope we can all have good results in stock market.