This could be an option but OP never specified it wasn't his own stop order that got him out but a different one, so I didn't take that into account.
I did read it and even did more research because it was unclear, it turns out that it's even possible that if the market moves so fast even the protective orders get cancelled and won't be placed back. There is only one conclusion here, don't hold trades over news like this.
I fully agree, but it's still important to understand the mechanics of what happened. If, for no other reason, than to drive home the danger to newbs that -- if you don't know what you're doing with index futures -- it only takes a few seconds for the market to remove your testicles without anesthesia.
Then my question would be can an algo create or trigger a velocity logic situation outside of any news event? Say human error or algo error like in: Knight Capital algorithm malfunction The Knight Capital Trading Error High-frequency trading and the $440m mistake - BBC News If so, what is supposed to protect us? Velocity logic? It didn't protect the OP. So how can we protect ourselves in such an event? Something to think about. Maybe use a leveraged inverse ETF? But how could that work for scalping? It seems to me that a scalper would have to go either long or short but not both say for 3 days he was going to scalp long ONLY and use a full hedge via inverse leveraged ETF hedging against any adverse crash in his long positions??? He couldn't be taking both long and short trades in the same session or could he??? This type of hedge seems to come out maybe better that hedging with options???
The stop order was definitely canceled. Once an order is canceled, that's it, it no longer exists. The only way it gets resent is from the trading platform. It doesn't sound like his trading was automated, and in the fog of panic, who knows what the OP might have done, or what he might have clicked on.
I tend to think his broker held the order then sent it but it was rejected because of the velocity logic then like you said once it could be sent again the broker sent it and it got executed when market was already down. I think it is safe to say the broker didn't lose. That is why I want to use a broker that immediately routes the order through a routing service who in turn routes an order directly to the CME exchange without intermediaries. However, still the question remains even so in a velocity logic event would that resting order on the CME exchange get cancelled anyway because of the velocity logic event. And if so, is there ANY way to protect one's order from being canceled and re-entered at a lower level incurring a loss (if initial entry was long) or if not how can we mitigate a loss that occurred in the case of a velocity event. Regardless of when or why the loss occurred? Handle 123 where are you? Surely you have the answer.
According to the link I posted, your stop is going to get canceled during a velocity event -- like it or not. Even if the broker revived the OP's stop post-event, it should have been resubmitted at the stop's original price, well above the market, and the protection points should have been applied at that original level, and his position should have remained open, thus protecting him from getting killed. I'm starting to think that, in the fog of panic, the OP may have inadvertently stopped himself out at the lower level. If I'm right about the OP stopping himself out, and you had been long during that event, your stop would have been canceled and you would be holding a position that was seriously underwater. If your account couldn't cover the drawdown and the margin requirements, the broker would probably close your position for a big loss. I don't think there is any way out of it. If your account could handle the drawdown and more, you would be faced with whether to hold and hope for a quick recovery, or fold and take the hit. Although, in your case, you could also average down... and probably make it work.
It's very unlikely that an algo would cause a 90 point drop in a second without any orders being traded in between. Yes algos going haywire can cause crashes, but not with such big gaps. Anyway, you can't 100% protect yourself against these extreme events unless you get neutral by either exiting the trade before the release or fully hedging the position. Stops don't have a guaranteed fill price, never has and never will.