Just studying the markets today and had a crazy 40 pip+ EUR/USD spike at exactly 3PM GMT
I was curious to know what caused this as this move was far greater than earlier in the day.
Good job mine is a demo account as in practice just lost £2k OMG
The view from Finance Magnates –
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I guess it’s time to opt for a short-only approach 
One possible way to diversify accounts…
I have heard and read some on this subject. I think Bacon Sandwich hit the nail on the head with liquidity.
Reason # 1 Dutchia Bank rejected the Betrix agreement…
Reason #2 and I think more likely is a big carry trader or two decided to collect on their position as things are getting a little interesting with JPY interest down and USD interest up. And it is Wednesday and the carry traders get paid multiples.
I think another major impact is Apple dovish talks with investors due to the US/China dealings causing an impact in their financials is a major hit especially since we are referring to a company that’s high up there in the S&P. Definitely global uncertainty is just causing safe haven zones to get flocked too.
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Hi @BaconSandwich,
Under NFA Compliance Rule 2-36, any US-regulated broker must provide you with transaction data upon request for the 15 forex transactions in the same currency pair occurring immediately before and after your transaction.
We discussed the requirements set by the CFTC and NFA for US-regulated forex brokers in more detail in this earlier post: Canada now the WORST place to be Forex Trader & kiss overseas Broker goodbye
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momoisnyc, Bloomberg agrees with your sentiment.
Video: Why the FX flash crash happened
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Sounds like an unfair fight to fight.
Long live Gordon Gekko:
Bulls make money. Bears make money. Pigs? They get slaughtered.
I lost my account too that day, ironically it was the day that I had made the most profit in my 3 years of trading. I got too excited and opened too many trades coz things were superb. Risk management is key!
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News was released that day about massive inflows into Yen from Dollars. I suspect people took advantage of stop-losses and with that opportunity created a liquidity shock. Good reminder of the flaw of stop-loss orders.
Kinda interesting, kinda frustrating.
Had been short AUD/USD since Dec 27, and that was progressing slowly until the crash. Took me out at my take profit order. Was also short NZD/CHF - on an hourly strategy. That would’ve been around +30 but, with the wider spread and price spiking up before dropping, stop loss was hit (pretty much spot on) for -13. Though AUD/JPY came out with +44. Can’t complain.
Seems to me… Apple news and liquidity (Japanese holiday might have added to that). Markets seem to be generally skittish, so any news plus lack of liquidity could/can push them into crazytown.
I always use stop loss and take profit orders. I can’t wrap my head around not using a stop loss, but in this case not having one on that NZD/CHF trade would have worked out (this looks good in hindsight only). I am considering not using take profit orders because letting those other trades run a bit more would’ve been nice. Then again, I should probably keep my greed in check.
Guessing 2019 might be a wild ride. Good luck out there.
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what risk management would have worked?
I am very concerned about the viability of forex trading as a way to create wealth and cashflow. Would stop loss worked?
So may I ask, was your SL respected at or near the price it was set for?
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Yes, I use Stop losses and Take profits. Both of them were activated on AUD and YEN pairs. My account was protected and I made a good profit. USE STOPS and TAKE PROFITS!!! My accoutns are healthy and I made KaChing out of the flash crash… let me say it again: USE STOPS and TAKE PROFITS!!!
I am just curious; for those who did place stops and profit takes which were fulfilled; did your broker execute them close to your set price or was there wild slippage, and finally who is your broker? Perhaps we can get an idea of good brokers from this event?
I made an earlier post asking this questions, if anyone is interested it is here: Flash crash and which brokers had acceptable slippage on Stop Loss orders
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Good question. Mine were, were yours?
Who is your broker? Both my brokers executed Take profit and Stop loss orders very near my order entries and I made a nice profit.
Here is something to perhaps get your teeth into - granted this is from the c.1,200 pip Sterling flash crash of October 7th 2016 and not the JPY crash as the data is not yet public information, unless you have a DMA account and access to data - unikey. However, there are lots of similarities to perhaps look at.
Below is a chart showing a flash crash, you’ll notice the initial 10% to 15% of the decline is buoyant with both bid and ask quotes, this is where liquidity is sat at, and if your stop is sat in this phase of the flash crash it’s likely that you’ll receive less slippage. This is typical in all markets and makes sense, right?
It’s the remaining 80% of the tail where the damage is likely to hit home should you have your stop in this region, and it’s these stops that will likely to prove fruitless with a vast degree of slippage.
You’ll also see in the below chart that flash crashes don’t just ‘happen’ per se, they arise out of a downward moving market which already has a bearish bias - again, applying this logic to the Sterling flash crash of 7th October 2016 we can make similar connections between the JPY currencies (they were certainly taking a hammering well before the crash vs the base currency)
So what’s the moral of the story here? No they can’t be predicted, but don’t ignore the overall trend, any trend following trader who had a bias would have been short on a reasonable timeframe and therefore in the direction of the [mini] flash crash - the higher the time frame, generally, the more stable and less erratic price volatility will be when carrying out analysis.
If you’re interested here is the report on the Sterling flash crash of October 7th 2016 from the Bank of International Settlements (BIS) - there will be lots of similarities that we can pull from this that will apply to the most recent JPY move.
GBPUSD Flash Crash Report 07_10_2016.pdf (548.0 KB)
I’d recommend this if you want to understand the logistics of a flash crash, contributing factors, the ‘perfect storm of mistakes’ that cause a crash and also highbrow data analysis that will give you a step up from all the hearsay 
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