Political flash crash: opportunity or disaster?

EUR/USD

Key zone: 1.1550 - 1.1620

Buy: 1.1650 (on a strong positive foundation) ; target 1.1800-1.1850; StopLoss 1.1580

Sell: 1.1550 (after the 1.16 retest) ; target 1.1400-1.1350; StopLoss 1.1620

On October 10–11, the world experienced a classic flash crash—a panic sell-off in a critically overbought market that had not seen a full correction for several months.

It is unlikely that anyone managed to profit fully from this decline. The mass triggering of orders on both sides of the market was accompanied by technical glitches — terminals froze, and TakeProfit and StopLoss orders were not executed. There will be numerous claims against brokers, but they will be legally useless — such force majeure events are explicitly stated in the trading regulations.

The catalyst for the decline was a sharp escalation of the trade conflict between the US and China. After Beijing tightened export controls on rare earth metals, Trump, irritated by his failure to win the Nobel Prize, announced plans to:

• increase tariffs on all Chinese goods by 100% from November 1;
• cancel his meeting with Xi Jinping at the APEC summit on October 30-November 1;
• introduce additional trade restrictions on critical imports.

A few hours later, Trump announced that he had not yet decided whether he would actually be so categorical, but it was too late. Once again, Donnie tried to save the situation before the start of the week by stating that the US did not want to harm China and that there was still time to reach an agreement before November 1. Alas, Beijing's response was very harsh, with no willingness to compromise.

In a situation where NATO needs a lot of weapons and the EU is trying to recover through the defense sector, China's restriction on RBM supplies is a critical factor. Germany will be most uncomfortable, as its ability to purchase RBMs is much weaker than that of the US.

Nevertheless, the panic on the American market was much stronger.

We saw a classic domino effect: against the backdrop of geopolitical tensions, stock indices and the crypto market collapsed simultaneously.

Crypto lost about 22.5% of its turnover in 10-15 minutes on the night of October 11 — this was one of the largest volatility spikes since May 2021 and November 2022. Of the approximately $20 billion in futures liquidations, $16.7 billion were long positions.

Margin accounts for altcoins and scam assets were almost completely wiped out, with more than 99% liquidated.

The heaviest losses were suffered by: XRP (-57%), AVAX (-70%), LINK (-65%), LTC (-60%), ADA (-66%), DOT (-77%), and TON (-80%). Only assets that are bought back by large capital and monetary reserves remained relatively stable — BTC, ETH, BNB, SOL, and TRX.

Note how the major currencies reacted: Europe showed a slight gain, while Asian currencies reacted speculatively only in the most liquid crosses (e.g., AUD/JPY, EUR/AUD, GBP/JPY).

The US and European stock markets recorded a sharp collapse, but by Monday, a partial correction had already begun: indices recovered 50-70% of their losses, surviving cryptocurrencies rose, and this trend will continue today, as on Columbus Day, when the US debt market is closed, both the stock market and cryptocurrencies usually rise.

Conclusion:

The market reminded us that even the strongest positions can collapse in a matter of minutes. It is impossible to trade without:

• understanding the technical characteristics of an asset,
• fundamental analysis and assessment of the news background,
• taking into account intermarket correlations and the mutual influence of assets,
• reasonable leverage,
• strict money management with mandatory hedging.

Risk management remains the main condition for survival: no more than 20-30% of capital should be in open trades.

Remember: the financial market existed before us and will continue to operate after us. The only question is whether we will remain its participants after the next storm.

So we act wisely and avoid unnecessary risks.

Profits to y’all!