Whether you've been doing business in the stock exchange for a while now or have yet to enter it and begin trading, stock market crashes are the ultimate nightmare.
Once upon a time, a fellow decided to invest his hard-earned money in the market.
Things were great and he did make a good profit here and there.
He was looking forward to spending his retirement in someplace exotic.
Then one day, without any clear explanation, prices in stock dropped.
There was panic and chaos everywhere and within days, he lost all his money - and his mind.
A stock crash has been defined as a sudden dramatic downward slope in stock prices within a significant cross-section of a particular market.
Stock market crashes are considered as social phenomena where outside economic forces, together with mass behavior and psychology, make up a positive feedback loop where selling by some traders drives even more traders to sell.
Although there is no numerical criterion that defines or qualifies market crashes, they are deemed as those that have high double-digit percentage losses in a market index over a period of several days.
In history, the world has seen at least two incredible stock market crashes.
The first one happened during the Roaring Twenties, when technological innovations abound, and has been known as the Wall Street Crash of 1929 and also referred to as Black Tuesday.
The second one happened in the mid-'80s, a time of strong economic optimism, and has been dubbed as the Crash of 1987 and also referred to as Black Monday.
When the next one will be, no one really knows.
Just be sure to always have a backup plan and don't invest every penny you have in the stock market.
Use you profits to invest in property and other items, so if the crash happens you won't be left bankrupt.