You are right, there is no solution for this how you describe it. If you are long in a highly leveraged position, and a nuclear bomb is dropped somewhere, of course you will pay the price for the long position you took. This is the kind of risk that I am willing to accept, this is part of trading and cant be avoided, at least not 100%. What I want to avoid is a situation in which I loose control when I should not have lost control. No extreme shock event or something like that, but loss of connection to broker, to exchange, datafeed, risks like those. These kind of risks can be avoided, and backup brokers, accounts and instruments are part of this. If I loose control over my position in the market, even a regular non-farm payroll event with numbers that come very out of line could ruin me. Imagine 10 minutes before non-farm payrolls, I have a position of 80 contracts ES long and I receive a call from my broker that they have a technical problem and I cannot close my position. Non-farm payrolls are no shock event, but if you loose control over your account even such scheduled economic data could ruin you. This is the kind of risk that I want to eliminate. In the past I did this by using a second FCM as a backup. But this combination wont cover all these types of unnecessary risks. Therefore I am having a closer look at options now and will probably open a options trading account as additional backup.
%% You can buy insurance; or insure it yourself, C columbus. Having done both i recommend both.NOT a prediction but if you are worried about it+ sounds like you are, cut back your size.Good thing about blowing up an account when young; may live to recover from it?? Another thing about insuring yourself, by trading reasonable size, you get to keep the profit the insurance/option co would have made. Actually 911 was not a big shock in price; wartime emotional shock and airlines, on a downtrend gapped down...... + turned around As you discerned ,you cant cover all of your risk 100%.
Yes, there is a solution. Persistently own strangles as a backstop. I'm not sure what part of that is unclear...
It is clear that it is a solution, it is like an insurance. Of course one will have to pay a price for this. I have not too much knowledge about options so I have no idea what I have to expect. Will for sure have to check this out soon. Thank you for pointing it out again.
Thank you for your input. Food for thought... With your view on 911 however I dont agree: "Anticipating market chaos, panic selling and a disastrous loss of value in the wake of the attacks, the NYSE and the Nasdaq remained closed until September 17, the longest shutdown since 1933. Moreover, many trading, brokerage, and other financial firms had offices in the World Trade Center and were unable to function in the wake of the tragic loss of life and collapse of both towers. On the first day of NYSE trading after 9/11, the market fell 684 points, a 7.1% decline, setting a record for the biggest loss in exchange history for one trading day. At the close of trading that Friday, ending a week that saw the biggest losses in NYSE history, the Dow Jones was down almost 1,370 points, representing a loss of over 14%. The Standard and Poor's (S&P) index lost 11.6%. An estimated $1.4 trillion in value was lost in those five days of trading." I would not like to be trapped in a position in such a situation :-//
Yes, I see your point. A longterm trend follower would probably not have been trapped, or even if he would have been trapped he maybe would have not cared that much about it. But for a longterm trendfollower the risk that I discuss here, the risk of a highly leveraged scalper, is not really relevant. He would maybe have had a short position of 2 to 5 emini futures and just have surfed down the wave. A shortterm scalper like me, with the same risk capital of that longterm trader, would have maybe scalped on that day, several times a day, both long and short (who cares about the longterm trend as a scalper ) with a clip size of something like 50 emini futures contracts. And thats the difference: if the longterm trader gets stuck in his position, for whatever reason, he has a much smaller position on than the scalper/ shortterm trader and therefore much less risk. It is just a completly different world.