Samuel Brian D Baker

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What was the 2010 Flash Crash and what did it reveal about forex markets?

The 2010 Flash Crash mainly impacted U.S. equities but highlighted how algorithmic trading could destabilize markets. In forex, similar flash crashes have occurred—such as GBP’s sudden drop in October 2016. These events show that liquidity vacuums and algorithmic triggers can cause extreme short-term moves, sometimes unrelated to fundamentals. Institutions responded by improving circuit breakers and monitoring algos. Retail traders face risk of stop-loss slippage in such events. Lessons: liquidity risk is real, and black swan moves can happen anytime. The Flash Crash underscores the need for robust risk controls, such as using guaranteed stops where available.