{quote} What are the risks of trading during periods of low liquidity? Liquidity is defined by how quickly an asset can be bought or sold without the price changing and depends directly on the volume of trades and quantity of market participants. When there is a lack of requests from market participants (buyers and sellers), liquidity is said to be low, negatively affecting order fulfillment since it is often accompanied by a widening of the spread. Low liquidity can be observed: When macroeconomic...
they know their stuff; after all they went bankrupt on a crash.
well, it was a regular slow period, not the exact rollover, not a monday open, not a friday close.
and if anything is definitive,
based on the day and time of the day, it could be any or all trading day ticking the same boxes as a possible crash candidate.
what may be more of interest, is the aftermath.
24-36 hours later, pretty much all is back to 'pre-crash levels',
sort of countering the notion that it was a fundamental/news based move; and perhaps more suggestive of a fat finger type of error, or algos going berserk.
as one above mentioned,
a big % of retail, even so called "ECN" stays in-house with the broker, and get only partially hedged as needed to balance the books.
add to this, the thin liquidity...is thin for a reason, a lot less of the small retail traders will ever bother with minors crosses, even volume on pairs like GBPJPY is significantly lower than on majors, not to mention pairs like AUDJPY.
i dont think any of the big players in their right mind count to pick up significant size from the retailers on pairs like that.
but then, again, most of those trades stay within the broker's order book anyhow.
if anything, this 'crash', or fast market moves give brokers the upper hand to print their retailers whatever price they dare,
look up some well regulated brokers for samples, for a jaw dropping difference on same pairs, same time, by different brokers.
for example:
GbpAud
your chart Oanda high: 2.0274
on IC Markets chart: 1.8419
on Axitrader chart: 1.8826
all is regulated. so how on earth is this possible?
would you believe that each claiming a wide range of liquidity providers, is possible that the aggregated best quotes has this array of difference?
isnt the whole idea of multiple liquidity providers to filter out those ones that at the moment offer off quotes?
but then, if broker's chart show something, the broker will hold you to that, ie. claim you SL hit, or blame 100s of pips on slippage, spread, or whatever.
the icing on the cake, that brokers can manipulate their charts, even after event, and redraw highs/lows as best fit them. MT4 gives the option to do.
so, as a final thought:
doesnt really matter what initiate a crash, it matters ultimately who benefit of it, and who lose on it.
the clear losers were the retail side, no big players were on the market at the time, for simple no major trading center was open.
but then if no major players could benefit, in the end who did?
i would suspect retail brokers, and on that, those largest with the biggest books?
happy trading!
there is always, always another trade!!
