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The One Nobody Talks About

  • #21
  • Feb 11, 2009 11:18am Feb 11, 2009 11:18am
The promisary note you sign waives your LLC protection and holds you responsible. That is exactly why I called ATC - to find that out.

Quoting BlackMage
This is why you should trade through a LLC company account and not a personal account.
  • #22
  • Feb 11, 2009 11:24am Feb 11, 2009 11:24am
I will give my thoughts on this. If you look at huge catastrophic events like 9/11, the EURUSD only moved 200 pips that day! And the week finished completely normal. So although 9/11 was not a nuke, there was a lot of uncertainty exactly how much damage the US would sustain. Yet the market stayed stable - a perfect example of how the majority of its transaction are not speculative, bur are simply playcheck translations.

Okay, Lehman brothers and Bear Stearns collapses - both saw large moves and w/ Lehman we lost 6% of the entire forex marketplace - it might as well have been a bomb explodng.

So I am just trying to build a context for what we might expect in extreme disaster.
  • #23
  • Edited 11:44am Feb 11, 2009 11:29am | Edited 11:44am
Quote
That's what I don't get! FXCM clearly advertise "never pay a debit balance" but Clause 23.1 E states, in bold, "You will at all times be liable for the payment of any debit balance on your account and you will be liable for any deficiency remaining on your account in the event of the liquidation thereof in whole or in part by your or them".
So they advertise one thing and make you agree to another. That's lovely.

Quote
If they just hold your trade until they decide to fill your stop a few ticks later, wouldn't it be a little tricky for them to try and sue you for it??
That is a really good question. I think that'd be the direction to go in order to fight it.

But here in the US they don't have to sue you in order to bug you with collection calls, they can just sell your imaginary debt to a collection firm and let you fight it out with them.

Quote
The promisary note you sign waives your LLC protection and holds you responsible. That is exactly why I called ATC - to find that out.
Sure, but most brokers don't. So don't sign up with ATC, there's only a billion others. I would, however, doubt the legality of the contract. A promissory note tends to need a stated amount (somewhere), there's a lot of gray area you could call into question.

edit:
Quote
Okay, Lehman brothers and Bear Stearns collapses - both saw large moves and w/ Lehman we lost 6% of the entire forex marketplace - it might as well have been a bomb explodng.
There's a massive difference between a big move and a gap w/ no trading. A big move still offers counter parties. Have you ever seen a 200 pip gap during the middle of a trading day? Say 2 GMT to 20 GMT?

Of course past performance is not indicative of future results.
  • #24
  • Feb 11, 2009 1:13pm Feb 11, 2009 1:13pm
Quoting price
Hey daytrading, how are you?? You make a good point.
If a broker does not execute your stop, and then says you owe a large debit..... They may need to prove that there were no market orders for the whole "1000pips". Isn't it unlikely that everyone could make all of their pending orders disappear all at once. There should be tons of orders being filled along the way.
If they just hold your trade until they decide to fill your stop a few ticks later, wouldn't it be a little tricky for them to try and sue you for it??
And if they widen their spread...

what if a broker CANT execute your order. it is possible for a situation to arise where there are no available orders to match your stop with anywhere within 200 to 300 pips. i mean honestly, who is going to have an order placed 300 pips below the current price? im guessing a very limited few. these kinds of situations could arise. also, remember that there is a priority system for orders, im not sure but i think it goes market orders first, and limit and stop orders come second. so they would fill the market orders first before they filled your stops. and if there arent enough orders to go around..... then you are screwed. you can blame the broker for this kind of thing happening. it's just how the market works.

Also, a BIG thing to remember: NOTHING IN FUTURES IS EVER GUARANTEED

stuff happens. this is just how the world works.


EDIT:

another thing, remember that gaps can only occur when someone decides to sell/buy at a certain price and someone else decides to take the opposite side of that contract, making it a legitimate price. in this case, it is a legal move or a legal tick. the only way a "gap" would occur is over the weekend or right in between bars. a gap is arbitrary, it is really just the next tick, but it happens when a new bar opens. the same problem can occur with a tick as with a gap. they are the same thing, just represented differently on a chart.
  • #25
  • Feb 11, 2009 1:35pm Feb 11, 2009 1:35pm
what if a broker Can't execute your order?? >>>>

What would it take for that to happen?? There are a lot of stop, tp, and pending orders on both sides of the price, and in both directions. If a bomb went off, can one tick just clear through all of them with out clearing yours??
It seems they would have to widen the spread to hundreds of pips for that to happen. That would skip a ton of orders in one blink. But then sue you for it?? Might have to argue that there is risk for the broker as well as for the trader. I think we should all go and re-read our contract.
  • #26
  • Feb 11, 2009 2:04pm Feb 11, 2009 2:04pm
Quoting tdion
The promisary note you sign waives your LLC protection and holds you responsible. That is exactly why I called ATC - to find that out.
Well, then they would have to go through a danish court in my case. And I would be very suprised if this court did not tell the to go screw themself.
  • #27
  • Feb 11, 2009 3:51pm Feb 11, 2009 3:51pm
Quoting price
what if a broker Can't execute your order?? >>>>

What would it take for that to happen?? There are a lot of stop, tp, and pending orders on both sides of the price, and in both directions. If a bomb went off, can one tick just clear through all of them with out clearing yours??
It seems they would have to widen the spread to hundreds of pips for that to happen. That would skip a ton of orders in one blink. But then sue you for it?? Might have to argue that there is risk for the broker as well as for the trader. I think we should all go and re-read...

in this kind of situation, everyone is going to be trying to get out of the market. but there are a limited amount of orders, both market and pending. let's say you are in a buy and the market drops 500 pips, shooting right through your stop. there are going to be a lot of other buyers trying to sell their positions, along with yours. a good majority of these people will get their orders filled, but some wont. those who wont are the ones im talking about. in this case, if you are using leverage/margin and you are risking enough that a 500 pip move will wipe you out, you can have a debit on your account. remember, you ARE playing with someone else's money when you use leverage and margin. plus if you look at most clauses that talk about stops, they say that your buy stop will trade at OR BELOW the specified price. you arent GUARANTEED the specific price on the order. this is called slippage, most of you know that. slippage is NOT illegal, is NOT a trick. it just happens. now, wehn you are playing with someone else's money, you are responsible for it. so if you get into a situation like that, you could, possible end up having to pay the broker money.

now, with all that being said, with small sums of money, this isnt going to be a problem, because, most likely, you will get stopped out eventually. on a 5K account, you will probably owe a couple hundred bucks, maybe less. but when you have large orders, the probability of you getting finally stopped out decreases, seeing as everyone is competing for the same orders you are, AND you are competing for MORE money than the 5k guy. so most of the poeple on this forum dont have to worry about this problem, unless they are large money managers or instituional traders, then again, those people would already know how these situatuions would play out.
  • #28
  • Feb 11, 2009 4:07pm Feb 11, 2009 4:07pm
Actually, most cases you won't owe anything, because of a margin call.


But in this thread we are talking about ridiculous news, such as the entire global bank system collapsing.... or the Euro suddenly becoming worthless (don't ask me how)
  • #29
  • Feb 11, 2009 4:16pm Feb 11, 2009 4:16pm
Quoting Rabid
There's a massive difference between a big move and a gap w/ no trading. A big move still offers counter parties. Have you ever seen a 200 pip gap during the middle of a trading day? Say 2 GMT to 20 GMT?
I don't even understand how a gap during normal trading hours would be possible [at forex] because market is so liquid there are always counterparties for your stops. Gap would mean that for some reason all the liquidity would suddenly disappear or someone big enough would suddenly "eat" all the liquidity. Even the most dramatic news usually don't happen in few seconds so if you have a stop, you will be filled at the market.

I'm trading ecn [IB] and even at most volatile news times the difference between my stop and fill is about 10 pips.

edit: was anyone trading ISK at the moment when their bank system basically collapsed? How were the fills?
  • #30
  • Feb 11, 2009 4:36pm Feb 11, 2009 4:36pm
Another thing: we also say "the market" but forex isn't a single central market - it is 6 or 8 giant banks connected, each creating their own independent markets.

So, it will really depend on what your liquidity providers are doing (through your ECN) ... the orders in your portal will be vastly different from ECN to ECN.
  • #31
  • Feb 11, 2009 5:04pm Feb 11, 2009 5:04pm
Quoting tdion
Another thing: we also say "the market" but forex isn't a single central market - it is 6 or 8 giant banks connected, each creating their own independent markets.

So, it will really depend on what your liquidity providers are doing (through your ECN) ... the orders in your portal will be vastly different from ECN to ECN.
Not really -

the majority of ECN platform providers share the same major contributors...worldwide. That is why its called ECN - electronic communications network. If JPMorgan is the best offer for 5million all ecn's that use JPMorgan as part of their network will see that same offer whether in NYK, LDN or Tokyo.

If someone lifts the offer for 1 million and the price stays, the offer will be down to 4 million, provided JPM is still the best offer.

In fact, most of the time the bid as well as the offer consists of several contributors stacked behind each other on a first come first serve basis - depending on the order type (fully visible, iceberg or hidden).



regards
daytrading
Enter Signature
  • #32
  • Feb 11, 2009 6:35pm Feb 11, 2009 6:35pm
I achieved the honor of a neg balance after a gap (not fx) You can protect yourself with guaranteed stops with some brokers
BTC Return This Year: na
  • #33
  • Feb 11, 2009 8:42pm Feb 11, 2009 8:42pm
Quoting Takisd
Use logic thanks. .
My post wasnt about logic, it was simply about the fact that some brokers do warn of negative balance and the possibility of such things happening. Whether they "chase" as you say $500 of backed balances isnt really a concern of mine. Although, there is that chance of it going from ... say +$3000 to -$500
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #34
  • Feb 11, 2009 8:59pm Feb 11, 2009 8:59pm
You change your nationality, name adress get divorced and giveaway all your belongings to your relatives before solicitor come.

Rest is brokers problem.
  • #35
  • Feb 11, 2009 11:01pm Feb 11, 2009 11:01pm
In mathematics of money managment Ralph Vince states the only financial instrument with risk limited to purchase price is long options.
In trading you are only as smart as your dumbest mistake. - Ralph Vince
  • #36
  • Feb 11, 2009 11:44pm Feb 11, 2009 11:44pm
Whilst working for CFD provider I had the displeasure, although interesting experience, of liasing with a client that went into a 6 figure debit on his account due to a stock losing 75% in one gap down (this was some time ago, not a recent event).

So I can tell you that the broker wants their money back somehow, thing is that in FX the chance of such a gap down is of course extremely remote.
  • #37
  • Feb 12, 2009 10:13am Feb 12, 2009 10:13am
Quoting SliverB
In mathematics of money managment Ralph Vince states the only financial instrument with risk limited to purchase price is long options.

nope. anything that can go to zero has limited risk. thats why long options are limited. if you buy, the farthest it can go down is 0. if you sell, it can go up infinitely. in forex, a currency pair can never reach zero, because currency prices are relative.
  • #38
  • Feb 12, 2009 10:20am Feb 12, 2009 10:20am
Quoting blacksun1
in forex, a currency pair can never reach zero, because currency prices are relative.

And all swans are definitely white? The German Mark in 1920's Germany was worthless. The Zimbabwean Dollar now is worthless. These are pretty extraordinary times, nothing can be ruled out entirely.
  • #39
  • Feb 12, 2009 12:52pm Feb 12, 2009 12:52pm
Quoting birdt
And all swans are definitely white? The German Mark in 1920's Germany was worthless. The Zimbabwean Dollar now is worthless. These are pretty extraordinary times, nothing can be ruled out entirely.


it's not technically worthless. it's almost so, but it still is worth something like 0.00000000000001 dollars or whatever. it's not technically zero, but for all intents and purposes it is. it might not have any purchasing power in the real world, but it still is worth something.


edit:

by the way, i wasn't saying currencies themselves couldn't go to zero, i said currency PAIRS couldn't. look at my previous post.
  • #40
  • Feb 15, 2009 12:33am Feb 15, 2009 12:33am
Quoting blacksun1
nope. anything that can go to zero has limited risk. thats why long options are limited. if you buy, the farthest it can go down is 0. if you sell, it can go up infinitely. in forex, a currency pair can never reach zero, because currency prices are relative.
1. Leverage is often necessary for fixed fractional (or similar) money managment.

2. It is irrelevant whether something can go to zero or not, if one uses margin for leverage.

3. Long options are the only way to gain leverage without exposing one to the risks of margin. You pay the option writer to take on this risk in the option premium.
In trading you are only as smart as your dumbest mistake. - Ralph Vince
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