The pound flash crash: what an Asian-session gap taught the market
Posted: Thu Oct 29, 2026 5:10 am
On October 7, 2016, during the thin Asian session, the British pound dropped about six percent against the dollar within minutes, then recovered most of the move almost as quickly. It happened with no scheduled news.
Several explanations circulated. Algorithms responding to headlines about Brexit negotiations, thin liquidity, and automated stop orders all played a role. The speed of the move left many participants unable to react.
For retail traders, the main lesson was about timing and liquidity. The least liquid hours can produce the most violent moves when something trips an algorithm. A stop-loss set in a quiet period can fill far from its level.
It also showed that charts from different brokers can look different during such events, because some filter extreme quotes and others display them.
This does not mean avoiding Asian hours entirely, but it is a reason to size positions conservatively when liquidity is thin and to avoid stacking correlated trades in sterling pairs.
Reading the post-mortem reports from official bodies is a useful exercise. They describe how liquidity vanished, which orders were triggered, and how recovery unfolded. The details show that extreme events follow patterns, and that the same patterns can appear again in different forms.
What risk controls would have protected an open scalp during an event like that?
Several explanations circulated. Algorithms responding to headlines about Brexit negotiations, thin liquidity, and automated stop orders all played a role. The speed of the move left many participants unable to react.
For retail traders, the main lesson was about timing and liquidity. The least liquid hours can produce the most violent moves when something trips an algorithm. A stop-loss set in a quiet period can fill far from its level.
It also showed that charts from different brokers can look different during such events, because some filter extreme quotes and others display them.
This does not mean avoiding Asian hours entirely, but it is a reason to size positions conservatively when liquidity is thin and to avoid stacking correlated trades in sterling pairs.
Reading the post-mortem reports from official bodies is a useful exercise. They describe how liquidity vanished, which orders were triggered, and how recovery unfolded. The details show that extreme events follow patterns, and that the same patterns can appear again in different forms.
What risk controls would have protected an open scalp during an event like that?