If your site has been penalized or see a negative impact on your rankings, you need to start the recovery process immediately. If your rankings dropped on October 4th it was due to your link profile. Below are several steps you need to take to recover from this mess.
Download all of your links from Google Webmaster Tools and go to each page where you have a link. You will need to review the site for several key factors:
Determine if the site is well done or looks like it was put together to sell links, blogs or ad space. A good measurement for this is, would you read this companies blog or would you review their services. If the site is low quality, you will need to reach out to the site owner and ask for removal of the link.
Relevance is very important to Google. It is a good way to sniff out paid links and blog posts. Look at the site and see if it is relevant to yours. If you are an automotive company the site you are evaluating needs to be about the automotive industry, local businesses in your area, or other qualities that you deem relevant. If the website talks about medical devices, it is probably not relevant and Google knows that and this link needs to be removed.
Check and see how many outgoing links there are from this page and site. A good tool to use for this is http://www.wintzell.net/seo-tools/domain-outbound-links-check.php. Note: the link above is what you would consider a natural link. I am linking to this page because they have a great tool and it is being used as a reference in this article. If there are a lot of outbound links from this site and the page your link is on, it may need to be removed.
Once you have gone through all inbound links to your site and graded them based on these factors, you will need to reach out to the site owners and have them remove the link. Unfortunately, this is a very tedious and difficult task. Most likely, your site is participating in a link scheme and these vendors do not like to remove the links without being compensated. It is a very unfortunate circumstance, so we recommend that you do the best you can and log everything you have done in a spreadsheet as evidence for Google.
Google introduced the disavow tool a year ago. This tool lets you tell Google that your site does not wish to be associated with certain links. Once you have done your outreach, the remaining links that are bad will need to be uploaded in a format designated by Google and they will remove the remaining links. This process takes several weeks for Google to complete, so you will now have to wait and see how Google receives the changes.