Managing risk of broker platform outage

Discussion in 'Risk Management' started by helpme_please, Aug 16, 2019.

  1. This thread highlights what can go wrong when broker platform breaks down.

    It can be extremely damaging for day-trading futures scalpers who uses huge leverage. After they placed highly leveraged orders, the platform breaks down leaving their highly leveraged positions meant to be ultra-short term exposed for the rest of the day. It can kill traders if that day happens to be a huge reversal day. Using multiple brokers is a solution for those who have long-term positions but not a solution for these day-trading scalpers.

    How would elitetraders, especially short-term scalpers, manage this risk?
    Last edited: Aug 16, 2019
  2. Overnight


    A. Do not be highly-leveraged.

    B. Be hedged all the time.

    C. Have the phone number of your broker on speed-dial.

    There is no need for D, because if you do not have A, B and C, yer screwed anyways?

    A and C are the important bits there I think.
  3. Robert Morse

    Robert Morse Sponsor

    We talked about that in the thread too. I suggested futures traders create a Firmsoft login at the CME and another suggested having a backup account at another broker.
  4. Lower leverage will solve the problem but it's the nature of day traders to use large leverage to score meaningful gains since they can't hold the position for long.

    I doubt having the phone number will help because this phone number will probably be jammed when the online platform breaks down. Everyone will be dialling this number.

    Being hedged all the time helps but if the platform breaks down before you can place the hedging order, it is of no use.
  5. I don't know how a backup account can help since the same broker whose platform is down has to be used to close the existing open order.

    EDIT: Ahh ... I see how another broker helps. One can place a hedging order with the other broker to eliminate the risk of the open order placed on the lousy broker platform which broke down.
  6. comagnum


    It's a real good idea to place every order as a bracket, with at least the stop loss. I bracket both the stop loss & profit target, this way you don't have a care in the world if you lose connectivity to your broker.
    helpme_please likes this.
  7. Handle123


    If you going to do scalping, and you doing 5-10 lots which is small, best to have 2 brokers and 2 different kinds of platforms, like Ninjatrader using cable internet, your order actually goes to Denver? first then passed to your broker if not using Ninja-broker than exchange then another could be Tradestation but this one hooked up with DSL, should have a generator outside in case you lose power. I use to have a internet speed box which would detect when cable internet go down and automatically switch to DSL. Couple times didn't know the cable went down cost chunk of money. So you have to make sure of how many pings if you considering using a service where your platform is on a server in Chicago and of course their server can go down as well, but most unlikely. Once you get size up, better to buy a seat at CME, have your own platform created sitting on a server less than mile from the exchange and use T-1 dedicated phone line into the Globex. And still have a backup, just in case with a broker.

    As far as risk, long term positions automated, when directions and speed of price for different timeframes alters, options or underlying in different contract months applied for hedges. But only profitable way to "hedge" for my style when scalping is increasing of margin, if options used the cost would be too great as targets as 0 to 4 ticks, way too many weeks netting under one tick in ES based on original entries and not averaging down positions. Have started this year of instead leaving profits in this account, each month shift funds to trading stock options.

    On some software's the protective stop unless it is a stop limit order, does not go into Globex but sits on your computer or brokers. Had this happen to me long ago more than one where PC freezes and stops never engaged.
    10_bagger and PennySnatch like this.
  8. tiddlywinks


    Agree. But of importance is that this can be beneficial only when the bracket (usually an OCO order) is held server-side. Server-side is a "feature" of the feed and/or the particular platform. Orders held locally (your running platform on your computer) defeat the entire benefit.
    helpme_please likes this.
  9. qlai


    I don't know if you will accept my answer, but when you get to the point where you have earned the right to put on highly leveraged positions, you should join a prop firm and risk their capital. Problem solved.
  10. I'm not that good.

    For the sake of discussion, for those who are really good and do not need to transfer risk to others, why join a prop firm and share your profits with others? Why not trade for yourself or start a hedge fund of your own?
    Last edited: Aug 16, 2019
    #10     Aug 16, 2019