How effective is stop limit order in extreme volatility? | Forex Factory

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How effective is stop limit order in extreme volatility?

  • #1
  • First Post: Jan 18, 2015 10:06pm Jan 18, 2015 10:06pm
How effective is stop limit orders? I checked several brokers' risk exposures, all of them have a condition saying "limit orders may not be filled due to extreme market volatility". IF this is the case, then what is the point of stop limit orders? In case of the swiss franc event, many clients trades were re-quoted due to lack of liquidity and as a result the account is wiped out + negative balances owing to the broker. but the whole point of having a stop limit order is to prevent huge losses related to this kind of market volatility. I'm curious to know how everyone thinks on this issue? btw, i was fortunate that i didn't have any positions open during the news release, but this thing really worries me now.
use leverage with caution...
  • #2
  • Jan 18, 2015 11:26pm Jan 18, 2015 11:26pm
Don't hold positions in currencies when Central banks of those currencies are releasing anything market sensitive. Something I did before this Swissy event.
  • #3
  • Jan 18, 2015 11:57pm Jan 18, 2015 11:57pm
Quoting jsshuai
How effective is stop limit orders? I checked several brokers' risk exposures, all of them have a condition saying "limit orders may not be filled due to extreme market volatility". IF this is the case, then what is the point of stop limit orders? In case of the swiss franc event, many clients trades were re-quoted due to lack of liquidity and as a result the account is wiped out + negative balances owing to the broker. but the whole point of having a stop limit order is to prevent huge losses related to this kind of market volatility. I'm curious...
They don't mean Jack when there is nobody on the other side willing to take your trade.
  • #4
  • Jan 19, 2015 12:34am Jan 19, 2015 12:34am
It's a market - there always needs to be a buyer and a seller. If you buy a currency and then want to sell it because that currency is losing value (stop loss), and no one wants to buy it from you, then you have to wait until the next available buyer comes along. This might be at a price lower than you intended. If you look through your charts you will probably find gaps. The gap between last year and the new year (2015) is just such an example. This is exactly what is happening in the market when these gaps occur.
"Risk comes from not knowing what you're doing." - Warren Buffett
  • #5
  • Jan 19, 2015 9:11am Jan 19, 2015 9:11am
it is left to the mercy of the market after all. regulators probably gonna come in and say leverage must be reduced. don't know where this is going, forex trading may not be for retail guys.
use leverage with caution...
  • #6
  • Jan 19, 2015 9:15am Jan 19, 2015 9:15am
Quoting BubaYaga
Don't hold positions in currencies when Central banks of those currencies are releasing anything market sensitive. Something I did before this Swissy event.
80% of the time I also already did this - it will now be 100% of the time that's for sure.
  • #7
  • Jan 19, 2015 4:04pm Jan 19, 2015 4:04pm
Quoting BubaYaga
Don't hold positions in currencies when Central banks of those currencies are releasing anything market sensitive. Something I did before this Swissy event.
question though, was the swiss event during a scheduled central bank announcement?
use leverage with caution...
  • #8
  • Jan 19, 2015 4:14pm Jan 19, 2015 4:14pm
Quoting jsshuai
{quote} question though, was the swiss event during a scheduled central bank announcement?
No.
  • #9
  • Jan 19, 2015 4:28pm Jan 19, 2015 4:28pm
Quoting jsshuai
{quote} question though, was the swiss event during a scheduled central bank announcement?
It happened at the same time as the Switzerland Interest Rate decision when they lowered their interest rate from -0.25 to -0.75 which was obviously a scheduled central bank announcement.
  • #10
  • Last Post: Jan 21, 2015 9:37pm Jan 21, 2015 9:37pm
You could get a broker who knows what they're doing. Ironically mine is Swiss. It looks like the market makers tried to go for a big kill and got slaughtered like worthless dogs in the process.

 

  1. Dukascopy is my broker of choice and I do recommend them. They are an ECN broker and they had this SNB fiasco covered by raising leverage on EURCHF exposures to 1:10. When looking at their charts which show the depth of the market (DOM), only a madman would take a position on CHF pairs.

    http://forexmagnates.com/dukascopy-f...s-chf-crosses/
    “The scenario of such shock had been anticipated four months in advance as shown in our news published on 3rd of October 2014: “Due to the possibility of a break of the 1.2000 floor in EUR/CHF which may see significant price gaps and cause negative equity on client accounts, Dukascopy Bank is forced to implement a maximum leverage for EURCHF exposures of 1:10 as of 12 October 2014.”

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