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What was the "Flash Crash"?

On May 6, 2010, investors around the world were shocked when the Dow Jones Industrial Average fell nearly 1,000 points in a matter of minutes. The market recovered just as quickly, finishing the day down a much lesser 348 points.

The so-termed "flash crash" was caused by a trader's technical errors in entering order amounts, which caused a few stocks to post erroneous numbers (notably Procter & Gamble, which showed a 37% loss, before recovering to a 2% loss on the day).

This caused a massive sale of stock by investors, plunging the price down at a terrifying rate. It was short-lived, however, and the market finished 2010 positive.

The moral of the story is that investors should take care not to be too frazzled by volatility.

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Keywords: market statistics, market scandals, market performance, risk tolerance, volatility,