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  • Writer's pictureRafael Gutierrez

How to lose 50% in a day?


 


Invest in #Argentina..on 8/12/19 the Argentine stock market crashed nearly 38% in one day, which is roughly 50% in USD.


Can the US Stock market crash like this? Theoretically, yes, but actually no, at least not in one day.


After Black Monday on October 19,1987, which had a 22% drop in one day in US markets, regulators decided to implement some rules that will prevent something like this happening again, called trading curbs or circuit breakers.




Circuit breakers work like this: If the market drops X%, trading will stop for 15 minutes and then resume. If it continues to drop to the next threshold, it will stop again for 15 minutes. If resumed and the market continues to drop, then trading is stopped for the day.


These levels are at 7%, 13% and 20%. Special note, the 7% and 13% thresholds are only valid before 3:25 pm. If the markets drop after that time, trading will only stop once the it hits 20%.


Let's hope we never see this, and the overall market has only had one circuit breaker, however there are separate rules that apply to individual #stocks.

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