I don’t know of any books on that topic but it is straightforward. Trade small and aggressively defend your trades. With that, check out babypips school as they likely cover these topics in more details.
You will then spend a lifetime learning how to master what it means to defend and preserve your capital while you trade live.
All JPY pairs were in an existing downtrend prior to the mini “flash crash”. It’s worth realising that these events do not just happen in any market cycle, they certainly don’t happen when price is rallying.
Over the last 10 years or more all flash crash events in FX have occurred in already established downward moving markets… the trend really is your friend. Congrats to anyone who took this basic advice on board and scored this time around.
GBP.JPY perhaps the most aggressive in the JPY pairs, a clear downtrend too prior to the shift.
What I do find really interesting though is why the GBP.USD slid at the same time as the JPY pairs, whilst the EUR.USD did absolutely nothing. (yet both EUR.JPY and GBP.JPY slid)
Here is GBP.USD
I have been informed that it was illiquidty flash crash, something that happens now and again. The algos did a lo
t of the damage, to me anyway. One second up 10 pips then bang goodbye 50.
Well that is trading, thank heavens for stop loss.
All flash crashes are down to a lack of liquidity, that’s the underlying structure required to feed a fast paced movment in price. The more liquid a market the less erratic it moves, generally.
This is also one time I’d not listen to a broker either, they won’t tell you anything apart from the fact you were slid from your initial stop due to liquidity. Finding out where true liquidity was sitting against where you position was actually filled will be a fruitless task too.
If you are a CSW trader, this mini crash would have been in your favour BTW, probably would have blown past your TP.
The YEN was already strong through out yesterday and going short on it was already a disaster waiting to happen.
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
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.
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
momoisnyc, Bloomberg agrees with your sentiment.
Video: Why the FX flash crash happened
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.
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?
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!!!
