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

  1. #11
    Junior Member gery115's Avatar
    21
    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

  2. #12
    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.

  3. #13
    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.

  4. #14
    Junior Member Yeyocr's Avatar
    18
    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.

  5. #15
    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.

  6. #16
    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.

  7. #17
    Junior Member gery115's Avatar
    21
    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.

  8. #18
    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 .

  9. #19
    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

  10. #20
    Junior Member albamd94's Avatar
    26
    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-b...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.

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