The 2016 sterling flash crash: what did it teach you?
In October 2016 sterling fell roughly 6% against the dollar in minutes during Asian hours, then mostly recovered. Thin liquidity and automated flows did the damage; stops filled at absurd prices.
What's your takeaway?
- how the crash changed your stop placement
- whether you trade sterling in Asian hours now
- the tail-risk rule you added after studying it
The flash crash guide reconstructs the move.
Background: The sterling flash crash of 7 October 2016: what the BIS investigation found
Sterling fell about 9% against the dollar in early Asian trading before recovering much of the move. The BIS found no single cause. What it concluded, and what it means for your stops.
What caused the 2016 sterling flash crash?
The BIS found no single cause. Low liquidity in early Asian trading, selling to hedge options, stop-loss orders and algorithms run by less experienced staff combined to amplify the move.
How much did the pound fall in the flash crash?
Sterling fell around 9% against the US dollar in early Asian trading on 7 October 2016, before quickly recovering much of the move.
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