Is it possible to avoid getting wiped out by a move like SNB?

[Grandoli1990]

Hi ,

I have been demo trading quite successfully to the point at which I'm considering going real.
However the surprise move by the SNB last week and the resultant horror stories have me thinking.

Was there a means to avoid being wiped out in case you had been long eurchf using a stop loss?

I guess my question is: are there any brokers that would have ensured the execution of a stop loss even in this circumstance, even with a massive gap?
Because if not, then trading FX is just crazy.

Thanks

[Cocoandre23]

Funny thing about IG was that you couldn't open any EUR/CHF positions with guaranted SLs until it failed.

[paodelpri]

Hi , I've been demo trading quite successfully to the point where I'm considering going real. However the surprise move by the picture http://www.forexpeacearmy.com/forex-forum/traders-glossary/tag/SNB/ last week along with the resultant horror stories have got me thinking. Was there a means to prevent being wiped out if you had been eurchf using a picture http://www.forexpeacearmy.com/forex-forum/traders-glossary/tag/stop loss/? I guess my question is: are there any brokers that would have ensured the execution... in case you don't understand why the stops weren't triggered you do not yet understand enough about the market to risk real capital. You avoid situations such as the eurchf by remaining away from pegged currencies or currencies that are undergoing routine Central Bank direct intervention. In addition you avoid situations such as this by saying that nobody will give you a free lunch and you also prevent situations you do not understand. In addition you have a very great think about quantifying risk vulnerability. Knowing the dangers of high leverage would also be invaluable to you.

[Javipkmorales7]

Alt11, you have asked the exact same question that's on my mind. The point is that, even with a stop loss, your trading account may get wiped out. That is 1 lesson. Another lesson is that, if your account goes into negative equity, your broker can come after you to get the negative balance. I've traded a small live account with FCXM and'd assumed that the reply to your query was to keep only the minimum in the trading account to maintain margin, and if the worst happened then all of you would lose was that the cash in the account (given that FXCM had been up-front with their promises about not pursuing negative balances). Given what's happened with FXCM this week however, I'm now wondering how in the world you can ever know your risk. . .apart from trading with a broker with CLEARLY stop losses?

[Grandoli1990]

I guess my question is: Are there any brokers that would have ensured the execution of a stop loss even in this circumstance, in spite of a huge gap?

Due

[oxtaysquiroz]

Really simple to avoid losing more, when you have a fair, accountable broker.

Don't have a stoploss however a order that the otherway. With those huge moves those orders almost won't slip and you can't lose anything more(your target ).

[Cocoandre23]

I guess my question is: Are there some brokers which could have guaranteed the implementation of a stop loss even in this case, even with a massive gap? Thanks IG.

They have a guaranteed stop loss function.

[Grandoli1990]

Really easy to prevent losing more, in case you've got a fair, liable broker. Do not have a stoploss but a order the otherway. With those big moves those orders practically won't slip and you can't eliminate anything more(your target ). However, in the case of a huge gap like this the opposite order would not happen to be triggered either, or only when the price reappeared following the gap, so the reduction would nevertheless have been massively greater than the gain of the brief. Anyway your account could be wiped out before the opposite order may be implemented.

Anyway is not the absence of liquidity argument totally? Considering that the brokers do not actually pass any order when you place one, they just manage the risk betting you are going to blow your account sooner or later?

What I do notice though is the charts of several brokers had a huge gap although some others did not.
Are there brokers who actually guarantee the execution of stop loss orders at the set price even in cases like these, or will be at the next best bid the very best any broker will offer?

[Grandoli1990]

quote IG. They have a guaranteed stop loss function. Thanks
Yes, their TOS look fairly straightforward about it

[Grandoli1990]

Great, they currently their risk.
Fact is that there were quite a few articles out there warning of the risk in the days before it happened.
The Chinese central bank burnt quite a few traders also last year just like that to get rid of trading.
But the fact is anything could happen nowadays (terrorism nuclear ...) and you want to understand your stop losses will be triggered whatever occurs.

[gery115]

Hi all, I've been demo trading very successfully to the point at which I am thinking of going real. However the surprise move by the SNB last week along with the ensuing horror stories have got me thinking. Was there a way to avoid being wiped out in case you were long eurchf using a stop loss? I guess my question is: Are there some brokers which would have ensured the execution of a stop loss even in this case, in spite of a enormous gap? Because if not, then trading FX is simply crazy. Thanks One broker that assisted was Oanda. They didn't guarantee that the stop per se, but they didn't even forgive any negative balance UP TO your stop. No broker will ensure any stop precisely because of these types of events. No on can forecast the future and that is why we must be careful.

Step you can take:Use a broker such as Oanda Trade with lower leverage - don't use ALL your leverage Keep just enough money in your trading account to correctly margin your account, for the leverage you may utilize. Take all other funds dedied to trading and place them in a safe interest bearing account. That way if you are wiped out with a black swan even you will just lose your margin and not your entire stock. Welcome to the real world of trading

[scanpk94]

Dont worry too much. You do NOT need to create a mechanism to avoid this occurring, for example grid hedging. Gaps this size only happen to pegged currencies / fixed price floors getting eliminated. Gaps this size does not occur to regular majors. Orders are all around the area.

Remember that there were small to non barrier options / option expiries under 1.20 on /chf. Unless there was a sadomasochist organisation...; EQUILIBRIUM distorted to the maximum; no market for a couple of minutes.

[Grandoli1990]

quote Require the rest of the funds dedied to trading and set them in a safe interest bearing account. This way if you are wiped out by a black swan even you will only lose your margin rather than your entire stock. Well it appears that in most cases the guys who got wiped out were liable for all of the losses, even those beyond what they had in their account. Therefore, even when the broken can't take it directly from the bank account linked to the trading account, he'll sue you for all of the rest. (which is exactly what I think is occurring at FXCM)

What's really crazy is that I can't imagine that brokers such as FXCM pass any real order after the orders of the retail clients, so no reduction had been actually incurred, yet they will take everything from them. (I can't start to know why anyone would remain with a company like FXCM after this)
These black swan events are improbable but they do happen, so when I can come across brokers who'll guarantee stops (and meet my other standards ) I will definitely go there.

[Yeyocr]

Here are some items I recommend to avoid risks such as the EURCHF debacle:
1) Put into a savings account $10,000 for each lot (100,000 units) you trade. This is based on my calculation of the reduction I would have incurred being on the wrong side of this EURCHF with 1 lot.
2) Choose a broker that's well-capitalized and, even better, has forgiven negative balances. As someone else suggested, this EURCHF occasion was a really useful stress test to see which brokers are worthy of our small business.
3) Do not trade pairs whose central banks are famous for surprise interventions. This usually means no trades in almost any CHF pair--. This involves trading the JPY pairs with warning when the Japanese central bank begins talking about crucial amounts. And for heaven's sake, do not trade any pair that's in the news for falling or spiking (e.g., the ruble). There is lots of money to be produced in pairs which are not drama queens. The EUR, GBP, AUD, and USD pairs are somewhat safer.
4) Make it a habit, daily, to read commentaries by people that are sharp, so that you're aware of that central banks are making noises about interventions. Do an internet search, and you're going to see who had intelligent remark on the CHF, with warnings given months in advance. I enjoy Kathy Lien, for instance.
5) Even in the event that you trade safer pairs, there's always the possibility of an assassination or other surprise occasion not orcheed with a central bank. ALWAYS have a stop in position (but realize that a stop is no guarantee). Consider shorter-term trades and being level (holding nothing but your base currency) at the close of each and every day.
6) I have never seen a central bank intervene through the North American session (approximately 8% EST to five p.m.) if you would like to be protected from this specific risk, trade just that session.

[jtteyvic]

quote so if I will find brokers who will guarantee stops (and meet my other standards ) I will certainly go there. IG and ETX funds both offer guaranteed stops. With ETX it'll cost you an additional #10 extra per trade. IG will add an additional spread.

[scanpk94]

quote IG and ETX capital both offer guaranteed stops. With ETX it'll cost you an additional #10 extra per trade. IG will add an additional spread. This has to be the most ridiculous idea I have ever heard. The entire purpose is that nothing is guaranteed when one looks at the swiss move. A whole lot of ECN brokers did not get quotes from banks which time. How the hell are they going to guarantee stops, its a power at play over them.

Only market markers may, as, well, they are the market and generate their own quotes.

Edit: I suppose you mean that they'll offer reimbursement / negative equilibrium coverage (insurance buying) for that sum, rather of a bonded stop, technically speaking. It is a little missleading.

[gery115]

Well it seems that in most cases the guys who got wiped out were liable for all the losses, even those outside the things they had in their account. So even when the broken can not take it straight from the bank account connected to the trading account, he will sue you for all the rest. (which is what I think is happening at FXCM)... They could attempt to sue of course, but this is the entire idea of this kind of account. Should you lose more than your account is worth they automatically close the trade and you're done. It is a margin call, in which you must replace the margin or reduce the account. It isn't stock or commodities trading. Your account is closed and that is it.


What is so crazy is that I can not envision that brokers such as FXCM pass any real order after the orders of their retail clients, so no reduction was actually incurred, nevertheless they may take everything out of them. (I can not start to know why anyone would stay with a company like FXCM later this) These black swan events are improbable but they do happen, so when I could find brokers who will guarantee stops (and fulfill my other standards ) I will certainly go there. That is the very truth of retail FX trading. All. . .ALL. . .retail Foreign Exchange brokers are bucket shops. They are the counter party to your trade. Your company never sees the light of the actual market, because its too small. So what is owed is owed to the broker, (who incidentally has the benefit of seeing where your stop is and may manipulate-to a certain extent, via the spread-the price that you see on your display. They will always find a way of taking your cash. They'll bluster and threaten, but ultimately when you have only the cash in their account, that is all they get.

I highly recommend for folks like us (retail traders), that we stay far from retail FX brokers. The current round of regulations has made it virtually impossible to come out ahead. The US, anyhow, is funneling everyone to the futures markets. But that market is more transparent. If I place an order it is a solitary mini-lot, I could see it appear on the market and get filled. This won't ever happen in the Foreign Exchange market at this level. . .for many explanations. . .the greatest of which the Foreign Exchange market is decentralized. You're only dealing with banks. . .banks that don't lose. . .ever. And with increased leverage, comes increased risk, and increased responsibility to act prudently.

I genuinely think we will begin seeing rising margin requirements, and much more regulations to protect the retail individual, that will finally push him from the company. Take heed and begin planing accordingly. If you want to continue trading. . .capitalize sufficiently to sustain this type of event, and/or move to a more transparent market.

[jtteyvic]

quote Edit: I guess you mean that they'll provide compensation / negative equilibrium protection (insurance buying) for this amount, instead of a bonded stop, technically speaking. It's a little missleading. YesI agree it could be misleading. Reading ETX legal docs you choose any reduction up to the quantity you place your stop loss and the remaining part of the difference is paid through insurance. I have just mentioned it as a guaranteed stop because that#8217;s exactly what IG and ETX both refer it .

[Grandoli1990]

quote How the hell are they will guarantee stops Because if you as a retail trader pass an order, it's just recorded in the platform, there's absolutely no real transaction. So the liquidity debate is just a joke.
That's why some brokers decided to forgive negative balances after the SNB fiasco.
If real cash was involved would they just forgive it?
I don't think so

[albamd94]

quote Because if you as a retail trader pass an order, it's just recorded in the platform there is no true trade. So the entire liquidity debate is only a joke. Its not a joke, to get a smaller brokerage there's PoP, http://www.investopedia.com/terms/p/primeofprime.asp, illustration; http://www.ebs.com/solutions/prime-brokerage/ebs-prime-of-prime-customers.aspx

Which is why some brokers made a decision to forgive negative balances after the SNB fiasco.If real cash had been involved would they simply forgive it? I do not think so Because that broker is B Book (Oanda, etc) or simply pursuing their customers debts isn't worth to destroying their'good' names. Other brokers may use it for marketing function.

[Adri5puyi]

quote Because when you as a retail trader pass an order, it is just recorded in the platform, there is absolutely no real trade. So the whole liquidity debate is a joke. That is why some brokers made a decision to forgive negative balances after the SNB fiasco. If actual cash had been involved would they simply forgive it? I really don't think so is dependent on what kind of broker you have.

This explains it quite well imo
https://www.cliqforex.com/general-forex-discussion/2801-usd-cad.html

[Grandoli1990]

quote Its not a joke, to get a smaller brokerage there's PoP, http://www.investopedia.com/terms/p/primeofprime.asp, illustration; http://www.ebs.com/solutions/prime-brokerage/ebs-prime-of-prime-customers.aspx quote Because that broker is either B Book (Oanda, etc) or simply chasing their clients debts isn't worth to ruining their'good' names. Other brokers may use it for marketing purpose. But wouldn't all retail traders at FXCM be on B book?

[sokiayHM]

Hi , I have been demo trading very successfully to the point at which I'm considering going real. However the surprise move from the SNB last week and the ensuing horror stories have got me thinking. Was there a way to avoid being wiped out if you were long eurchf with a stop loss? I guess my question is: Are there any brokers that would have ensured the implementation of a stop loss even in this case, even with a huge gap? Because if not, then trading FX is simply crazy. Thanks Easy answer is cash management.
Build your account up gradually. When you start seeing big cash on your account dont think you can start increasing lotsize to increase profits prematurely. Its better to reduce your risk as equity goes up until you get to a place where you cant lose. Then boost your lotsize.
Create a trading program and stay with it. Any strategy should have all this worked out already.
I see that Forex shouldn't be treated like a company but I disagree.
Treat it like a business and you will have more chance of succeeding.
Create a robust plan and stay with it. Dont let greed let stupidity from the door.

[Grandoli1990]

Thank you for the advice
I am just thinking that it is hard to have a strategy if you can't accurately calculate your risk. And if it is possible that stop loss order aren't implemented then it casts a doubt on the validity of the entire thing.
I am really considering trading currency futures today. Have to find out more about it.

[sokiayHM]

Thank you for the advice I'm just thinking that it is difficult to have a strategy if you cannot precisely calculate your risk. And when it is possible that stop loss order aren't implemented then it casts a doubt about the validity of the whole thing. I'm actually considering trading currency futures. Have to learn more. You cannot precisely calculate your risk whatsoever.
The best that you can do is prepare yourself for the worst case situation.
Black thursday is your NEW benchmark so prepare yourself for that X2 and you should be relatively safe.
But when you reach that point keep reducing your risk and there'll come a stage where ridding will eventually become impossible.

[sokiayHM]

Here is a simple equation:

0.01 lot X 1000 pips = $100
0.01 lot X 10000 pips = $1000

So for each $1000 dollars of equity if you exchange with a 0.01 lot size you account can suffer a transfer of up to 10,000 pips before being wiped out.
Some might say these amounts dont look attractive and also its a waste of time trading for all those yields.
If thats true trading is not for you because this is actually the reality.
There is absolutely not any need to loose an account, accounts are dropped through failing to grasp the very simple fact ive outlined above.

[Javipkmorales7]

This is a very simple equation: 0.01 lot X 1000 pips = $100 0.01 lot X 10000 pips = $1000 So for every $1000 dollars of equity if you exchange with a 0.01 lot size you account may suffer a transfer of up to 10,000 pips prior to being wiped out. Some may say these figures dont seem attractive and its a waste of time trading to get those yields. If thats the case trading is not for you as this is actually the reality. There's not any need to loose an account, accounts are lost via failing to grasp the simple fact ive outlined above. That is not really the problem though. The point is that current events have proven some us who are newer to Forex which it is likely to do everything in our ability to manage risk, and still end up with not only our trading capital wiped out (no matter stop losses, which only function to manage risk if they get stuffed ), but could wind up owing MORE than is in our trading account. In theory, it would be possible to conduct up infinite losses. . .and who is willing to risk this?

My take on this is it is reasonable to trade only if (1) the trader employs a broker who offers guaranteed stop losses (for additional disperse, such as IG), (2) the trader employs a broker who is legally bound not to pursue negative balances (that they have'forgiven' a negative balance in the past does not mean they'll do it again in the future), or (3) operates in another method to avoid personal liability for negative balances, such as trading as a small company within the UK (I would be interested in hearing from anybody in the united kingdom who transactions this manner ).

[jtteyvic]

As someone who8217;s only recently beginning to get into Currency Market I've been scouring the internet to get a broker that provides negative balance protection, however if any brokers like FXCM are to proceed by then once the business runs into trouble they will come across some obscure clause in the contract in order to chase you for the adverse balance. Sure you could go to get a broker such as Oanda that forgave adverse accounts because of this specific occasion but there#8217;s nothing from the contract claiming they can do this for a similar occasion in the future if it be a freak event or just because of losses you've made on multiple trades. As an alternative, you could look for brokers offering guaranteed stops. Nonetheless, this is only suitable for those not earning many trades as it comes with an additional price. This leads me to say that if you want some sort of reassurance that you won't get wiped out within a matter of minutes do not utilize leverage or keep it minimal. Hedge funds typically use 4-8:1. If you do not have the capital to trade then do not trade. In case a 14% change is enough to wipe out your funding then your leverage is too high. It all comes down to risk management. The leverage ratios supplied by the majority of retail brokerages is just too high.

[sokiayHM]

quote That is not really the issue though. The point is that recent events have proven some us who are newer to Forex that it's possible to do everything in our ability to handle risk, and still end up with not only our trading funds wiped out (regardless of prevent losses, which only work to handle risk should they get loaded ), but could end up owing MORE than is in our trading account. In theory, it might be possible to run up limitless losses. . .and who's willing to risk this? My take on this is it is reasonable to trade only if (1) the trader uses... Is it not?
Ok. So you would rather set the safety of your money in someone else's hands by over leveraging a trade and relying upon a stop loss?
Good luck!

[lorenuqui]

There is one simple and effective way to avoid being wiped out in events such as the snb of few weeks ago.

How is:
Don't exchange restricted currencies!

If regular you play with fire, you're going to have burn.

Trade only free-floating markets, you'd be pretty safe.

[lauravzquz]

There's one simple and efficient means to avoid being wiped out in occasions like the snb of few weeks ago. The way is: Don't exchange capped currencies! If everyday you play with passion, you're eventually going to get burn. Trade just quot;free-floatingquot; markets, you'd be quite safe. This^^

[Grandoli1990]

But isn't the euro only a set of pegged currencies? What if (crazy idea) the Greeks say ok we are out? Or if Germany does?
Sounds crazy but aren't black swans starting to be as common as ducks these days?

[Javipkmorales7]

quote Is it not? Okay. That means you would rather set the safety of your money in someone else's hands by over Implementing a trade and relying upon a stop loss? Good luck! I believe I know what you are saying (sorry I didn't get it first time). You're saying that traders could set their lot size (in your example, 0.01) such that it might require an'impossible' move concerning pips to wash them out? That's making sense to me personally, if I've captured your meaning...?

So if I was trading using #100,000, I could look at the pair I'm thinking of trading and also work out what maximum adverse effect could possibly be (the price going to 0? Can a currency pair ever go unwanted??) , work out that in pips, then make sure my lot size is small enough to cope with that'impossible' fall?

[igereka]

Hi , I've been demo trading quite successfully into the point at which I am thinking about going real. However the surprise move by the SNB last week and the ensuing horror stories have me thinking. Was there a means to prevent being wiped out in case you were long eurchf using a stop loss? I guess that my question is: are there some brokers that would have guaranteed the implementation of a stop loss even in this case, even with a huge gap? Because if not, then trading FX is just crazy. Thanks
Very easy do not trade around news devote 30 min before and after and on every day when it is news like every type of rate decision just don't trade that day. Thats as straightforward as you can get.

[oxrayoxrin98]

It is not about news, timing for entry and exit, volume of position, etc.. It's all about liquidity. Trading pairs with low liquidity you're risking to come across the present time, when there'll be just bulls and bears. Pairs with high liquidity will guarantee your order will be filled with slightest disperse and get lowest slippage (if not get at all). EUR/USD and commodities would be greatest resources to exchange, as liquidity there will not exhaust anyway.
However, occasionally it is wise to back off from your own principles and take risk. During recent ruble collapse I give an attempt to USD/RUB if Hotforex LP were still providing tolerable but likely to faint liquidity of $. Despite of risks to stumble upon a liquidity argument, the profits were worth to jump in.

[sokiayHM]

quote I believe I understand everything you are saying (sorry I didn't get it first time). You are saying that traders could put their lot dimensions (in your example, 0.01) such that it would require an'hopeless' move concerning pips to wipe out them? That's making sense to me, if I've captured your meaning...? So if I was trading with #100,000, I might look at the pair I am considering trading and also work out which greatest adverse effect could be (the price moving to 0? Could a currency pair ever go negative??) , work that out in pips, then make sure my lot size is... Exactly.
You dont have to go to the intense you stated but in case you did all the greater.
If you're able to cover a move similar to the CHF proceed on black thursday you should be pretty safe in most currency pairs. Utilize that event as your reference for preparing for the worst.
If you have a small account and cannot do this initially then understanding the principle will make certain you are constantly working towards that goal as your equity increases.
Always keep the protection of your equity in your hands.

[Wafalopwz]

Hi all, I've been demo trading quite successfully to the point where I'm thinking of going real. However the surprise move by the SNB last week along with the resultant horror stories have me thinking. Was there a way to prevent being wiped out in case you had been long eurchf using a stop loss? I guess my question is: Are there any brokers that could have ensured the execution of a stop loss even in this circumstance, in spite of a huge gap? Because if not, then trading FX is just mad. Thanks
Don't be concerned about this occasion, it is so called black swan. Moreover, do not trade any pairs in which central bank holds rate of exchange artificially and do not enter market before important news releases or monetary policy statements and conventions. Always use stop loss, normally market is liquid enough to execute your SL with very little slippage, of course if you use reliable ECN model broker that doesn't reject trades, it is very important! Since I have been trading forex at reputable brokers I haven't had slippage bigger than 2 pips (I utilize tight SL, about 10 pips and also prevent all crimson news releases).

Happy trading!

[Javipkmorales7]

quote Exactly. You dont have to go to the extreme you stated but in case you did all the better. If it's possible to cover a move similar to the CHF move on black thursday you should be quite secure in most currency pairs. For preparing for the worst Utilize that event as your reference. If you've got a small account and cannot do so originally then at least understanding the principle will ensure that you are constantly working towards that goal as your equity rises. Always keep your equity in your hands' security. Thanks. . .that's actually helped my thinking. Much appreciated.

[pochis]

There is one easy and efficient means to avoid being wiped out in occasions like the snb of few weeks ago. The way is: Don't trade restricted currencies! You are eventually going to get burnt, if everyday you play with passion. Trade only free-floating markets, you would be safe. Great day Spaceduck.

Would you be so kind to tell which currencies are restricted?

Much appreciated.

[lidilp]

Hi , I've been demo trading very successfully to the point at which I'm considering going real. However the surprise move by the SNB last week along with the resultant horror stories have me thinking. Was there a means to avoid being wiped out if you had been long eurchf with a stop loss? I guess that my question is: Are there some brokers that could have ensured the implementation of a stop loss even in this case, in spite of a huge gap? Because if not, then trading FX is simply mad. Thank you Yep! Do not trade Fx.
This is until, however, that you understand the market.

Oh, I forgot to state, perhaps prayer helps in such scenarios although being of the atheist persuasion this is not in my trading program!

[jokiserra0]

Hi , I have been demo trading very successfully into the point where I am thinking about going real. However the surprise move by the SNB last week and the resultant horror stories have got me thinking. If you had been long eurchf using a stop loss was there a way to avoid being wiped out? I guess that my question is: are there any brokers that could have guaranteed the execution of a stop loss even in this circumstance, in spite of a massive gap? Because if not, then trading FX is just crazy. Thanks Very easy, do not expect your order to be filled at a place where no one wants to take the other hand, eg. Nobody was prepared to buy EURCHF below 1.2 but thousands were prepared to sell. I had been long EURCHF on two brokers, had my SL only above 1.2 and it got full of no slippage.

Other tips include depositing only a portion of your money with the broker, let us say 20%, and choose the one that says your equilibrium can't go negative.

[Sarioli]

If want to avoid getting wiped out by a move like SNB, triangle hedge trade maybe is a powerful method, I think.