The difficulty is in identifying what is a 'flash crash' (i.e. a temporary downward blip in prices caused by computer or human error) and what is a genuine downward price movement.

If the market dives and you quickly get into a big long position, and then it dives some more - what do you do? You can either close out your losing trade and take the loss, or hope that the market comes back up, all the while holding on to the risk of further losses.

Also, there's no guarantee that trades in the middle of a flash crash will remain valid after the crash. The exchange could nullify all trades in a certain period of time, which would completely wipe out your upside potential.