Gosh! My Account is Toast

[QUOTE=“Arbitrager on Acid;677613”]As traders we can’t simply depend on our dealers to execute our trades. We must also filter out set-ups that we have reason to believe our dealer cannot execute. I need to develop some set of rules that would do so. So far, the easy one is the “don’t trade currencies with pegs or floors”. Perhaps I might also avoid central bank notes with negative interest rate policies (a clear sign of desperation). My real error in this deal was thinking that if the SNB made a change the move would be thousands of pips over days or weeks not in an hour with no execution. I was poised with orders to benefit from a move over days in a liquid market. Any other ideas would be great…[/QUOTE]

You will be able to avoid any such moves like this in the future by avoiding having trades or orders open during central bank events such as speeches, rate statements and decisions, and monetary policy minutes. These are easy to avoid by simply pulling up a news calendar.

The only other possible catalyst for such a move would be an extreme and unforeseen act or God (giant solar storm, giant meteor strike, giant earthquake), or an act of war between one of the super powers (crippling cyber attack, or nuke). Any of these events would still probably not cause the type of slippage seen yesterday as long as stops were in place at the time of the event. Plus these events would be absolutely unpredictable and could be put out of mind in trying to develop a trading plan.

Know thy central banks and their modus operandi.
The problem here was not necessarily the floor, it was the penchant of the SNB to make unscheduled releases. History has shown that the institution of the floor in 2011 was unscheduled from what I read a while back and the interest rate cut on Dec 18 was unscheduled too, and so for me that was a warning sign. Now CHF is a free floating currency but at some stage in the future, if EUR survives, the SNB may peg this thing again and the drama would happen all over again but in a limited way since not everyone would have stops in a fixed area.

So in all honesty, the only way to survive this and other unforeseen terror acts is by not speculating or trading the open market.

Trading involves risk and trading a currency that is being kept in place artificially by a central bank means potential for even higher risk.

Most other currencies usually traded in the markets are dynamic and as such you are not going to see these kinds of moves so just keep calm and keep on trucking.

There is absolutely nothing an individual investor could have done to protect themselves from this other than not trading the CHF all together.

No amounts of stop loss or risk management is going to safe you when there is 0 liquidity in the market.
If you read some of the reports from the different brokers and liquidity providers they all say the same thing that at the time the news came out there was literally 0 liquidity in the market place hence the massive move.

I see some people complain about brokers adjusting trades after the fact but keep in mind most of the time this is to clients advantage.
I saw an interview with Saxo Bank for example where they stated they had been in contact with their liquidity providers all day to figure out if they could get better fills for their clients.
Could of course be all bs etc but given the extraordinary situation that took place I don’t see a reason to doubt it.

This event is not something you should blame your broker about you should instead blame yourself and the SNB.

Trading involves risk and slippage is the name of the game when big announcements happen.

[QUOTE=“aceofpips;677624”] Know thy central banks and their modus operandi. The problem here was not necessarily the floor, it was the penchant of the SNB to make unscheduled releases. History has shown that the institution of the floor in 2011 was unscheduled from what I read a while back and the interest rate cut on Dec 18 was unscheduled too, and so for me that was a warning sign. Now CHF is a free floating currency but at some stage in the future, if EUR survives, the SNB may peg this thing again and the drama would happen all over again but in a limited way since not everyone would have stops in a fixed area. So in all honesty, the only way to survive this and other unforeseen terror acts is by not speculating or trading the open market.[/QUOTE]

I can’t remember them raising rates or announcing big monetary policy events unscheduled. It will almost always be scheduled, what action they take at the scheduled meeting may be unexpected though.

The only time I’ve seen truly impromptu rate changes is to combat a currency crisis, like Russia is dealing with… And even at these times a bank typically gives an hour or so heads up to the media that they will be making an announcement.

Turkey last year also had very large impromptu rate hike to defend their currency… Caused lots of volatility but no where near the vacuum in liquidity that would cause stops to slip by hundreds of pips.

The unscheduled events actually seem to cause less slippage as you don’t have as many traders waiting to hit the buy sell button at a specific time. Takes a bit longer for everyone to react, therefore slippage is less.

Their rate cut on December 18, 2014 was unscheduled. Their scheduled rate announcement was a week earlier on December 11 but, for reasons best known to them, they did not announce the rate cut then

True… I guess it was “unscheduled”. I remember my news feed giving a heads up they were going to be making an announcement about an hour beforehand though. But yeh you are right.

Was Thursday’s announcement part of a pre-scheduled event? I don’t see anything on any calendars about it being scheduled. Perhaps it was and I am missing that.

For a long-term rule, I can’t get in and out of the market based on such calendars. I can only change my orders once a day and I need to take positions that work out over many days, weeks, or months with stops as wide as 10-day and 4-week price ranges.

I would keep a lookout for any broker reducing leverage for certain pairs. If they’re scared, I guess we should be too!

Now imagine if the EUR went bust.

I currently trade:
Aussie, Loonie, Dollar, Euro, Kiwi, Pound, Swissie, Yen, Yuan

Yuan is not free-floating, China could easily face a crisis soon, and they would probably have no problem pulling a stunt like the swiss, so after this shix I guess I am going to quit trading the yuan. Perhaps I could trade the krone? the krona? the zloty? the friggin’ peso?

im lucky i havent traded in some time after i lost money, makes me feel better now

Well that’s one way to look at it… ¯_(ツ)_/¯

So that would mean all USD pairs are out also. The most artificially controlled currency in the world.

Artificial yet fluid unlike the CHF pairs before the SNB move.

By your definition you would be unable to trade JPY and EUR (assuming the ECB will commence QE on Thusday) as well.

The other question that should be looked at is the total market share of traders/account balances that each of these companies carried when compared to other companies? How many of those customers had opted for the broker not to take the other side of trades?

In the case of the broker being the other party then I’m sure there would be some close attention to the need to offset risk if one side of the trade was getting a lot of trades stacked on but for customers who don’t want a broker on the other side there may have been less notice taken as in normal conditions any loss would be the customers risk only.

It might be that the brokers who handled this well are the ones who watch the customer accounts and positions like hawks…

I’m just pointing out that to try and have that rule is flawed from the start. You can’t find a currency that is not controlled or manipulated in some way. Some are pegged, some are financed out of thin air (I mean a printing press), others are propped up by someone else buying the debt to disguise the real buyer and the list goes on. If you run with the rule of no pegged currencies then you will be caught out badly when the US problems finally hit home or the EUR problems come to light fully because they are different problems not covered by the rule. The take away is asses the unique risks each currency carries, not look for band-aid rules for the PAST which is already gone.

This is all part of trading currencies. They are manipulated, controlled and directed. It is our task to try and divine what will happen with the limited information at hand. So instead of looking at what has happened in the past and trying to avoid that, the better option would be to understand what risks are still out there in the future and how to minimize your exposure to those. So instead of not trading XXX pairs, it should be what risk do those pairs carry in each and every trade and how do you control that risk.

As an example if TRADER A’s normal trade was $10/pip = 2% account/trade, looking back on things now do you think that having a CHF pair trading at $10/pip was a good risk idea? Or should it have clicked that because CHF was so artificially controlled it should have included a extra risk profile when working out the risk exposure? Certain brokers even forced this risk control on the customers who wanted to trade it with decreased leverage on certain CHF pairs. When people talk about managing risk per trade it is not just limited to a 1-2% account rule. Each currency has a unique risk profile that should at least be understood in the broader picture against all other currencies.
So CHF pairs might have carried a further -50%/pip because of the increased risk exposure.

With CHF, traders would have become complacent over time, the level has always been defended in the past so why not load up on lots at the solid bottom of the cycle. It has always paid in the past, its a safe BET. So instead of keeping the possible risk under control it might have gone the other way and all risks are put out of mind because the level is ALWAYS defended so why not do 5%/account trades on CHF when it hits bottom defended level.

Looking forward the real question all of us should be asking is WHY unpeg it now? What are they seeing in the future with the EUR that they want to get away from it now after fighting so hard to keep the peg in place? This should be a clear warning for your risk profile for the EUR going forward. Something can be seen by those that control these markets that they are trying to distance themselves from before it drags them down also.

Imho, there is Nothing strange in SNB move. Eur will face a long way to lower levels, SNB has already burnt a lot of money defending the peg and this took the country to face unforeseeable problems that Made swiss quite nervous and that they were probably not ready to face (the gold referendum was a good example of a financial system’s suicide even for a noob, but they took that risk anyway ). The real surprise was about how they did it, a central bank cannot behave this way…it would not surprise me if it will be found that someone’s wife in SNB has got a lot of money on thursday

About what will happen to forex, i don’t think they will limit account minimum size. There is ppl on other forums i’m in Who had 100.000€ in their account and now they are down with six digits numbers, so account minimum size is not the problem. The problem is leverage.

Just my two cents

Everybody makes mistakes!
A smart person learns from those mistakes.
Like you said:
“I have learnt a very bitter lesson. Time to shake off the dust and move on.”
:44:

Hey guys i feel your pain and lossed from the chf , a good rule of thumb is not to trade too many exotic pairs they are seen as currency crosses and not pairs a mere reflection of what a dollar is worth in another currency. I would stick to the major pairs that people trade and work a lot better from a technical stand point , i have been trading for about 9 years now and i only trade usd/cad eur/usd gbp/usd usd/py . These pairs usually have more liquidity and a lower spread and If you cant make pips from trading those pairs then switching to the exotics wont help much . good luck with the trading …

Sorry to see this. Just for me though, I always live by the saying to only invest on something where we can afford to lose.

Wow I am sorry for your loss. I feel your pain also I was down $50,302.00 from the de-pegging. heard a couple of Hedge Funds loss $829 million and went out of business. Cheers