Good points raised in the last 2 posts. I risk 1% of my account and allocate 10% to 15% for a single position. If I lose everything, it is a 10% to 15% loss. Sometimes there is quite a bit of correlation, so a general market plunge might mean a more severe loss. I try as best as I can not to commit too much in that way. If I have a good run, I would consider increasing the percentage risk. If an instrument means too much risk for my criteria, I don't trade it. There are many opportunities out there, no need to get stuck on any one.
Volpunter Thanks for your input on this thread and the other one you mention. I was actually considering replying there after I put more time into it. I checked the audit trail available on tws, and there is no much information on the capped orders (I might copy and paste part of it here later). I guess one can get more information, but not so keen on pushing the issue further with IB. It looks IB and other brokers are gonna be quite busy with legal issues over that CHF and I'm focusing on getting out of a drawdrown started in December.. But you write Lmax had no liquidity issues ? How come than brokers went bankrupt pointing the cause to liquidity drying up ? I was long 26RF contracts so the difference if I hedged over 1.05 when there were bids there but IB capped the orders and 1.0088 wich is the average price I could sell eurchf is not immaterial. But considering the lack of liquidity I'm far from convinced there was enough to exit fast at 1.05 or even 1.03. And again the technology issues discussed could easily destroy a traders' account (not that you claimed otherwise, I just want to remind traders out there), it will be a disaster even with a small leverage. Also if IB didn't cap SLs on futures, the account would have vanished as there was nobody to pickup the offer (I didn't have SLs on), anyone here has feedback on actual SLs on eurchf spot positions with IB ? Worst ever absolute money single day loss on my part (most of the portfolio suffered and I missed on euro stocks rebound after closing eurostocks positions mostly because tws wouldn't let me touch the eurchf), but not worst ever percentagewise. The whole month is not disastrous yet so far, but I don't like much those very volatile markets, and tws doesn't seem to either.
Everyone is a winner when trading on hindsight. What makes you think they would stop at 1000 points if there was still free money waiting to be picked up ? They could have just easily moved it by 2000 or 5000 points. The only reason they didn't do it was because there was no more profit to be made in that direction. Would anyone have dared to oppose the move or to take advantage of it ? Nope, all those who were supposed to take that side of the trade didn't want to play any more, and were crying like w**sies. What happened was just legal daylight robbery, and no one facing the wrong direction could have survived it.
Interesting. I found this too http://www.barchart.com/commodityfutures/Euro_FX_Futures/options/E6Z15?mode=d&view= Now need to figure out how this stuff translates into forex to get the cost of my example.
jaygould, -- I would think 100k in the spot fx would need a single option contract in the futures options. The big issue is the risk /reward might be hard to quantify+ finding exchange traded options for the dizzying number of fx crosses that exist. This is where I am stumped as to how to hedge .. and hedge at a cheap enough price for it to make sense. Seems to me that controlling leverage as advocated by volhunter is the only real way to survive these events. .. Any other suggestions from the pros? Thanks.
Try and not use high leverage on just one instrument. Use 1:1 leverage (or 2:1 maybe) on 5+ diverse FX pairs. That reduces the risk but of course does not eliminate it as all markets could crash together in another type of black swan event. In the final analysis, when you use leverage you always risk blowing up your account in some unknown scenario. All you can do is reduce the risk as much as you can but it will never be zero. These types of big gaps in the FX markets in a single cross have happened before. And will happen again.
Hi guys my broker is Cap Trader (interactive Brokers) and i had to face huge losses on the last thursday i had a small position about 1% risk in the Cad/Chf but my Stopps wasnt triggert and when i logged into my trading account -> all the money gone + negative balance Does someone know if there is any possibility (laws , policy?) to get the money back or part of it ? thx for your help and have a nice weekend
Hello Maverick74: Can you please explain why the Swiss had the peg to the Euro in the first place ? It seems to me that having a fixed exchange rate would have been a bad idea for the Swiss in the first place since it opens their economy up to the very problem which caused them to abandon the peg. In other words with a a fixed exchange rate the ECB creating more and more euros requires the SNB to create more and more francs as more and more Euros are exchanged for francs to escape the Euro devaluation. This in turn just means more inflation for the Swiss with no real advantages that I can see. While this disadvantage seems obvious in hind sight it also seems obvious from the very beginning. So why did they have a fixed exchange rate in the first place ?
Ouch ! At least it answers OP's and my question. Sorry to read about your loss, I'm afraid many traders are in a similar position. You can find more information about arbitration and litigation on this website, although IB seems well prepared. Not so sure about Cap Trader. Can you give us more information about the position size relative to the account, as well as the price you were liquidated ?
Why is USD dollars continuously becoming increasingly more expensive to the Swiss as the peg continued a problem? This was one of many reasons i read as to why the peg was dropped. Seems the same problem is present across many currencies in the world.