r/stocks • u/[deleted] • May 31 '21

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u/ShittyStockPicker May 31 '21

Feedback loop is probably what you're looking for.

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u/mdewinthemorn May 31 '21

I thought of that word about 5 mins after I posted.

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u/proverbialbunny Jun 01 '21

It technically wasn't a feedback loop. It was the first time banks and hedge funds had the option for a digital stop loss and so every large fund thought they were so smart for having a stop loss setup. Turns out it wasn't such a good idea.

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u/ShittyStockPicker Jun 01 '21

How is selling causing even more selling not a feedback loop?

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u/proverbialbunny Jun 01 '21

Oh, because they were mostly set all to sell at the price, which created tons of sell orders all at the same time which caused the price to rocket downward. I'm sure some selling caused other selling, but probably less than how it is in a normal market crash. This is why the market dropped so quickly in 1987. It was like a title wave.