The Flash Crash

What happened

On 6 May 2010 the Dow Jones lost about 1,000 points in minutes before recovering. Markets were already nervous about Greece.

USD/JPY fell about 5% in the same minutes as funds fled to the yen: a reminder that liquidity can vanish in any market.

How to survive a day like this

• Check the economic calendar and the news before you trade: these days were announced or brewing for hours.
• Reduce your risk: on extreme days, 0.5% per trade is plenty, because stops can slip far beyond where you placed them.
• Do not fight the first move. The first candles of a shock set the direction for the rest of the session more often than not.