When SNB announced that they will stop defending the EURCHF 1.2 floor and let CHF appreciate, Swiss Franc shot up 30%. What were some warning signs that traders could have heeded to protect themselves from this disaster? Did SNB issue warnings or made some hints before they make this U-turn decision? I assume all the traders/investors who were killed thought it was a safe carry trade.
There was none, no warnings, no hints, no signs, no nothing. This is why it caused such turmoil and the forex market had to shut down for several hours with nobody being able to exchange for swiss franc across the world. It was so sudden that nobody could even find the right price so majority of the traders who were in losing positions couldn't stop-loss and even the traders that were on the right side of the market couldn't even take profit and had to watch their profit turn into losses. Central banks' decisions are always like that, sudden and no signs or warnings or anything prior.
The SNB stated policy at the time was that they would support the EUR/CHF exchange rate by buying EUR as necessary. They clearly could not have stated how much they would buy or when they would stop as that would have negated their strategy. In the end, it was the chart that gave the clear warnings. If not warnings of a crash then at least ample warning to get out of long positions on this pair months ahead.
Absolutely no warning sign for the 2015 Swiss franc crash. Similarly no warning sign for the 10 Oct 2018 US index sharp drop. If there is warning sign, we'd be on high alert, grap the opportunity and trade with huge volume.
I wonder why the lack of warning from SNB. Usually, central banks drop hints so that traders can do the work for them without the central bank spending too much of their own money. Did SNB make a lot of money from this black swan event which is created by them?
This is why I trade currencies with a cap on losses and when I do trade spot forex I make sure I use an in-out strategy. This is exactly why I prefer Nadex.
What do you mean by cap on losses? Stop loss orders? For the swiss trade, CHF gapped right down bypassing the stops. That's why it killed so many.
I'm talking about trading forex binary options with Nadex because it's contract based and they expire. No need for a stop loss. So even if the market gaps, you only lose pre-set amount.
To an extent I agree. Especially since the Russell 2000 had already sold off significantly between Oct 1 and Oct 10, along with selling in the 10 year and the weakness in many international stock indicies.