Definition of Black Monday
By Dave Manuel
What does the expression "Black Monday" mean? What happened on "Black Monday"? What is the definition of "Black Monday"?
"Black Monday" most commonly refers to October 19th, 1987.
On this day, the Dow Jones Industrial Average (DJIA) dropped an astonishing 22.61% in just ONE DAY. To give you an idea of just how bad this single day drop was, the second worst day in the history of the Dow Jones Industrial Average came on October 28th, 1929, when the DJIA dropped 13.47%.
The other major US market indexes dropped precipitously on this day as well - the NASDAQ fell 11.35%, while the S&P 500 dropped 20.47%.
The exact reasons for the massive one-day drop are still being debated to this day.
Most believe that the drop came as a result of computerized trading and standard human emotions. A bit of selling turned into a wave of selling pressure as automated trading systems automatically hit the exits. Automated selling turned into panic selling, and the result was the largest one day decline in the history of the NASDAQ, DJIA and S&P 500.
As a result of "Black Monday", trading curbs (or circuit breakers) were installed to give traders time to contemplate massive sell-offs of at least 10%.
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