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  • #954,721
  • Jan 26, 2015 9:54pm Jan 26, 2015 9:54pm
Quoting fxtyrant
{quote} you better be sure your broker is a good one. FXCM and Alpari who offered high leverage accounts died...
They didn't die because of high leverage, but insufficient margin settings. If they were setup right, all trades would have been closed automatically before they went into negatives.
Everyone can see the chart, but only a few can actually read it.
  • #954,722
  • Jan 26, 2015 9:59pm Jan 26, 2015 9:59pm
Quoting OnlineAddict
{quote} They didn't die because of high leverage, but insufficient margin settings. If they were setup right, all trades would have been closed automatically before they went into negatives.
but for those trades to close the market needs to have liquidity at specific levels, problem with the SNB depeg is that brokers and even banks cant fill orders due to a sudden disappearance of liquidity....
We live in a finite world with infinite possibilities.
FxTyrant M-Series (Live - Darwinex) All Time Return: 0.7%
  • #954,723
  • Jan 26, 2015 10:05pm Jan 26, 2015 10:05pm
There is no way you can setup things right for situations like SNB because there wont be enough liquidity available for such a large number of orders. Leverage is the only lever brokers have to control this in the future...
Saw that fxtyrant send you the same comment.. I will just add the liquidity providers disappear in situations like this making things worse. Read about 2010 flash crash and the role liquidity providers played. Almost same scenario with SNB...
Quoting OnlineAddict
{quote} They didn't die because of high leverage, but insufficient margin settings. If they were setup right, all trades would have been closed automatically before they went into negatives.
  • #954,724
  • Jan 26, 2015 10:05pm Jan 26, 2015 10:05pm
Quoting fxtyrant
{quote} but for those trades to close the market needs to have liquidity at specific levels, problem with the SNB depeg is that brokers and even banks cant fill orders due to a sudden disappearance of liquidity....
Have a question here, you might know how the negative balances occured.

A trader can loose max. his a/c capital, that is how 300 or 500 : 1 leverages are supposed to be set.

There must be a security feature to stop out the a/c whether there is liquidity or not.

If there is no liquidity to fill the price, the Broker is responsible, right ?
Intraday only.
  • #954,725
  • Jan 26, 2015 10:10pm Jan 26, 2015 10:10pm
Quoting navk
If there is no liquidity to fill the price, the Broker is responsible, right ?
Lol. Have you read that contract? It is basically you sign if you die it is your fault. Nothing you can do about it. Would expand but believe Tyrant is already writing answer.
"I know one thing, that I know nothing." Sokrates
  • #954,726
  • Jan 26, 2015 10:10pm Jan 26, 2015 10:10pm
Quoting navk
{quote} Have a question here, you might know how the negative balances occured. A trader can loose max. his a/c capital, that is how 300 or 500 : 1 leverages are supposed to be set. There must be a security feature to stop out the a/c whether there is liquidity or not. If there is no liquidity to fill the price, the Broker is responsible, right ?
the broker is responsible to hedge by countering a client's trade by placing a trade, so if you have a 1:400 leverage account you place a 1 standard lot long, it means the broker has to place a 400 standard lot short to hedge the risk....
problem is when SNB unpegged, some clients who already has open orders suffer from a huge gap down and that gap down essentially means stop loss orders may not be filled.....
so what client thinks they are losing negative balance, the broker's failure to hedge by placing the counter trade is losing 400 times what the client's order is....
so both party are responsible to the brokerage's liquidity provider.

so to answer your question, no it is not merely the broker's fault, clients should also understand the risk of a non-fillable order in illiquid markets....
thats the risk you agreed to take as you signed the account opening documents. too many people have no idea what are the risks involved. let that be a lesson to all.
meanwhile people who dont pay up their negative balance, expect lawsuits and red flags on your credit reports.
We live in a finite world with infinite possibilities.
FxTyrant M-Series (Live - Darwinex) All Time Return: 0.7%
  • #954,727
  • Jan 26, 2015 10:15pm Jan 26, 2015 10:15pm
Quoting Tom_D_Trader
{quote} Lol. Have you read that contract? It is basically you sign if you die it is your fault. Nothing you can do about it. Would expand but believe Tyrant is already writing answer.
Yeah, I agree, we sign contract but if the Brokers are not able to fill the price, then what way the lesser leverage ( 1 : 50 ) can help ?
In a way, whether the leverage is 1: 50 or 1: 500, negative balance can occur.
Intraday only.
  • #954,728
  • Jan 26, 2015 10:17pm Jan 26, 2015 10:17pm
Oh look. the DXY hit 95.48 high..... in line with my forecast from listening to JP Morgan's chief strategist's conference....
said DXY will reach 95-100.
done deal.
next.
We live in a finite world with infinite possibilities.
FxTyrant M-Series (Live - Darwinex) All Time Return: 0.7%
  • #954,729
  • Jan 26, 2015 10:19pm Jan 26, 2015 10:19pm
Quoting navk
{quote} Yeah, I agree, we sign contract but if the Brokers are not able to fill the price, then what way the lesser leverage ( 1 : 50 ) can help ?
Well I leverage usually @ 1:3, so it is a bit different view, but the point is I just dont want to leverage through liquidity gap. 1:50 leveraged gap 20 pips below my SL? Lol, never ever this situation gets close to my account. Abage satanas.
"I know one thing, that I know nothing." Sokrates
  • #954,730
  • Jan 26, 2015 10:23pm Jan 26, 2015 10:23pm
Your comment below kind of confused me.. You are not saying the broker will hedge all clients order by taking the other side are you? In that case the orders from clients will not have an affect on the market right except for the stop losses? The hedge (protection or cushion) they have is the margin requirement (the cash they set aside for each trade) they set for clients. In this case due to lack of liquidity brokers could not close all trades (margin calls) on time so negative balance. Now they all increasing the margin to have a better cushion correct?
Quoting fxtyrant
{quote} the broker is responsible to hedge by countering a client's trade by placing a trade, so if you have a 1:400 leverage account you place a 1 standard lot long, it means the broker has to place a 400 standard lot short to hedge the risk.... problem is when SNB unpegged, some clients who already has open orders suffer from a huge gap down and that gap down essentially means stop loss orders may not be filled..... so what client thinks they are losing negative balance, the broker's failure to hedge by placing the counter trade is losing 400...
  • #954,731
  • Jan 26, 2015 10:24pm Jan 26, 2015 10:24pm
I know I shouldnt laugh coz it is definitely going to hit me, but this was lol again
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"I know one thing, that I know nothing." Sokrates
  • #954,732
  • Jan 26, 2015 10:29pm Jan 26, 2015 10:29pm
Quoting Xxavier
Your comment below kind of confused me.. You are not saying the broker will hedge all clients order by taking the other side are you? In that case the orders from clients will not have an affect on the market right except for the stop losses? The hedge (protection or cushion) they have is the margin requirement (the cash they set aside for each trade) they set for clients. In this case due to lack of liquidity brokers could not close all trades (margin calls) on time so negative balance. Now they all increasing the margin to have a better cushion...
hmmm let me rephrase this...
in order for a broker to hedge against a client who places a 1 lot 1:400 leverage trade.
the broker has to find a liquidity provider with 400 lot in the exchange market.....
doesnt have to be the broker filling it themselves. could be other banks doing a trade at that size which is not big at all for a bank....
the margin requirement is the cushion indeed. means the broker is having clients to put up more value to place a trade. thats because its likely reflecting the lack of market liquidity to fill the order on the opposite side.
We live in a finite world with infinite possibilities.
FxTyrant M-Series (Live - Darwinex) All Time Return: 0.7%
  • #954,733
  • Jan 26, 2015 10:50pm Jan 26, 2015 10:50pm
Just to make sure I understood you right. Here are the crux of what you said, please correct me if i got any wrong.
Brokers hedge all client orders by themselves or with the help of banks if there is an aggregate imbalance in buy and sell orders.
For the SNB event the client SL did not get filled on time and the brokers were not hedge properly hence lost money?


Quoting fxtyrant
{quote} hmmm let me rephrase this... in order for a broker to hedge against a client who places a 1 lot 1:400 leverage trade. the broker has to find a liquidity provider with 400 lot in the exchange market..... doesnt have to be the broker filling it themselves. could be other banks doing a trade at that size which is not big at all for a bank.... the margin requirement is the cushion indeed. means the broker is having clients to put up more value to place a trade. thats because its likely reflecting the lack of market liquidity to fill the order...
  • #954,734
  • Jan 26, 2015 11:09pm Jan 26, 2015 11:09pm
Quoting Xxavier
Just to make sure I understood you right.
He just makes it a bit confusing. Am native Czech so let me say it easy:
You place SL - broker places order at liquidity provider - you have a faking gap - both of you get filled at bad price.
"I know one thing, that I know nothing." Sokrates
  • #954,735
  • Jan 26, 2015 11:17pm Jan 26, 2015 11:17pm
Thank you but mine and broker's order are in two different directions. One long and one short so its not possible for both of us to get screwed at the same time right? why hedge otherwise?
Quoting Tom_D_Trader
{quote} He just makes it a bit confusing. Am native Czech so let me say it easy: You place SL - broker places order at liquidity provider - you have a faking gap - both of you get filled at bad price.
  • #954,736
  • Jan 26, 2015 11:18pm Jan 26, 2015 11:18pm
Quoting Tom_D_Trader
{quote} He just makes it a bit confusing. Am native Czech so let me say it easy: You place SL - broker places order at liquidity provider - you have a faking gap - both of you get filled at bad price.
Ok, the Traders did not place stop loss, so negative balance ?

I can not understand why the stopping out security feature due to low margin did not work ?

Broker/LP did not fill the price .

what is the point in having lower leverage in such case ?
Intraday only.
  • #954,737
  • Jan 26, 2015 11:25pm Jan 26, 2015 11:25pm
Quoting Xxavier
Thank you but mine and broker's order are in two different directions. One long and one short so its not possible for both of us to screw at the same time right? why hedge otherwise? {quote}
As you have discussed most of exposure is settled internally between clients. I think the remaining exposure is usually hedged, but it doesnt have to. Broker is also a trader, so keeps exposure. Also as liquidity is traded in tranches (lots) the higher bids the sooner they get filled. During such event there is massive need for a lack of liquidity and market lags. It is very hard, think almost technically impossible to hedge trades to the pip. When speaking of overleveraged trades, lossess accumulate.
"I know one thing, that I know nothing." Sokrates
  • #954,738
  • Jan 26, 2015 11:29pm Jan 26, 2015 11:29pm
Quoting navk
what is the point in having lower leverage in such case ?
Quoting Tom_D_Trader
You place SL - broker places order at liquidity provider - you have a faking gap - both of you get filled at bad price.
Quoting Tom_D_Trader
1:50 leveraged gap 20 pips below my SL?
The difference is, I get 3*20 pips negative and you get 50*20 pips negative. see the difference?
"I know one thing, that I know nothing." Sokrates
  • #954,739
  • Jan 26, 2015 11:52pm Jan 26, 2015 11:52pm
Quoting OnlineAddict
{quote} They didn't die because of high leverage, but insufficient margin settings. If they were setup right, all trades would have been closed automatically before they went into negatives.

look at the chart at the time being and tell me, when and how they have should closed the trades
  • #954,740
  • Jan 27, 2015 12:04am Jan 27, 2015 12:04am
Quoting navk
{quote} Ok, the Traders did not place stop loss, so negative balance ? I can not understand why the stopping out security feature due to low margin did not work ? Broker/LP did not fill the price . what is the point in having lower leverage in such case ?
negative balance? it's impossible in trading...if you go to 0 you get margin call...it's already game over...
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