"Retail investors remain on heightened alert, in fear of a sharp market sell-off.
Many investors are still healing from the brutal market beating that they took after the collapse of Lehman Brothers in the Fall of 2008 and the subsequent credit crisis that put the global financial system on the brink. But even with volatility to be expected, I don't think that many individual investors will forget May 6, 2010.
Of course I'm referring to the "Flash Crash", which will live in Wall Street infamy. That day saw the market plunge at an unprecedented speed and magnitude. The Dow Jones Industrial Average, which was under serious pressure already, down 350 points or 3.2%, dropped another 700 points in minutes, briefly wiping out $1 Trillion in capital.
High frequency trading (rapid automated buying and selling) accounts for 50 to 75 percent of the entire daily trading volume. That's massive -- all run by high tech, quant geeks who really don't know much about the art of trading, but they know numbers and mathematical models and can program computers that calculate and execute commands at lightning speed.
With the market under pressure, and the big institutions putting sell pressure on the indices, the price action had a snow ball effect. As the markets fell, the computer algorithms piled on, causing an avalanche that overwhelmed two-sided market making. The computers did what they're programmed to do, and they executed with merciless precision.
For more: The Tycoon Report - Costas Bocelli - Fear of "Catastrophic" Crash Rising Despite Bull Market
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