Avoiding slippage such as the EURCHF crash? | Forex Factory

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Avoiding slippage such as the EURCHF crash?

  • #1
  • First Post: Mar 19, 2015 1:21pm Mar 19, 2015 1:21pm
Hi all,

Starting to get serious into trading and looking at moving from demo to real money. The single biggest worry I have right now is slippage. witnessing the EURCHF crash with people having slippage of over 2000 pips it really scares me.

How can a trader expect to trade with the risk of unannounced news events not only wiping their accounts, but putting them into serious debt?

Should I look for guaranteed stops?

Is there any sort of prevention someone can make for such events? (I thought it was unpredicted)

Hope to hear your thoughts,
Thanks
  • #2
  • Mar 19, 2015 1:29pm Mar 19, 2015 1:29pm
Quoting flinx
Hi all, Starting to get serious into trading and looking at moving from demo to real money. The single biggest worry I have right now is slippage. witnessing the EURCHF crash with people having slippage of over 2000 pips it really scares me. How can a trader expect to trade with the risk of unannounced news events not only wiping their accounts, but putting them into serious debt? Should I look for guaranteed stops? Is there any sort of prevention someone can make for such events? (I thought it was unpredicted) Hope to hear your thoughts, Thanks...
Wish you best of luck!

FXPro has a "negative balance protection" so you can enroll money there if you want.

However, when it goes to negative balance, I think that there is no human being in the trading world, who will pay debt to broker, just because it's not written in your agreement, that you have to pay extra money if balance goes into negative.

Hope it helps!
Stay Hungry Stay Foolish
  • #3
  • Mar 19, 2015 1:50pm Mar 19, 2015 1:50pm
seeing that CHF crash earlier this year (fortunately i was out of the market that time) made me realize that I will just stay away from the market when there are upcoming big central bank announcements. lol!
  • #4
  • Mar 19, 2015 2:44pm Mar 19, 2015 2:44pm
Quoting KingofGreed
seeing that CHF crash earlier this year (fortunately i was out of the market that time) made me realize that I will just stay away from the market when there are upcoming big central bank announcements. lol!

I finished trading 15 minutes before it happen.

I sought that it was chart/broker error.

even though many of traders lost their money, think about how many guys with 5-10 K become "millionaires" in just a few minutes.

( brokers have never paid to them i guess)
Stay Hungry Stay Foolish
  • #5
  • Mar 19, 2015 7:21pm Mar 19, 2015 7:21pm
There are some solutions...First, never trade on a currency that it's central bank (SNB) is crazy and got bad history...Second, don't trade on a currency that it's central bank is fixing its exchange rate using a peg or a ceiling. Third, never ever trade with a retail forex broker as they won't be able to give a guaranteed stop loss and fast execution...Trade directly with a liquidity provider or a bank, if you don't have a lot of money to trade with a bank...it's simple, got get a fund solution like what I've done after the franc crisis and enjoy ultra fast execution, super low spreads and real interbank liquidity with no brokers involved in the middle slipping you or playing silly games during news releases/ events...You can get the fund solution for a few grands and you'll be trading directly with a liquidity provider...Cheers!!
Simplicity is the key to brilliance.
  • #6
  • Mar 19, 2015 11:28pm Mar 19, 2015 11:28pm
Quoting flinx
Hi all, Starting to get serious into trading and looking at moving from demo to real money. The single biggest worry I have right now is slippage. witnessing the EURCHF crash with people having slippage of over 2000 pips it really scares me. How can a trader expect to trade with the risk of unannounced news events not only wiping their accounts, but putting them into serious debt? Should I look for guaranteed stops? Is there any sort of prevention someone can make for such events? (I thought it was unpredicted) Hope to hear your thoughts, Thanks...

It wasn't slippage that occurred during the EUR/CHF flash crash if you will. It was a crash that dried up liquidity in the market. 1st time in history event for Forex, in other-words it never happened before this time. It also scared a lot of people, because it was one of those things that odds are happening are in the well lets put it extremely unlikely. Yet it happened.

Now there is no guarantees, no one can guarantee you something that is unforeseeable, and if they do.. well I personally wouldn't trust it. Its up to you to protect yourself not for someone else to do it.

Now how can a trader expect to trade with unforeseeable risk, its the nature of the beast. You can't say look, I want in, but I want to do it in a lesser intense level please scale my volatility down. It all comes down to understanding is this really something I wish to do? knowing that things can happen out of the blue, and they do.

In terms of choosing a broker, I've been saying for years no broker no matter how big or how many regulators they have are 100% safe. Empires and Giants fall there is no such a thing as "to big to fail" The bigger they are the more collateral damage is left.

As a trader you need to understand ALL the risk that is involved from your broker all the way to the market to the crazy minds of Central bankers. Everyone wants to gain for themselves no one is saying lets give the retail traders some profits.

Start small, diversify, get used to the risk, know that it takes lots of time and you'll lose lots of money before you experience anything catastrophic once again its the nature of the beast. Overtime things like that won't scare or bother you.
There are those who know, and there are those who don't know.
  • #7
  • Mar 20, 2015 1:42am Mar 20, 2015 1:42am
Quoting Nik13
{quote} I finished trading 15 minutes before it happen. I sought that it was chart/broker error. even though many of traders lost their money, think about how many guys with 5-10 K become "millionaires" in just a few minutes. ( brokers have never paid to them i guess)
Perhaps, 5-6 lucky guys, maybe even less.
Refusal to pay the profit would be a clear token of scam, as if profits are not valid, the same is with losses.

This blessed guy from Africa make tons of profit in a matter of seconds with HF http://analysis.hotforex.com/blog/20...elling-usdchf/.
  • #8
  • Mar 20, 2015 4:48am Mar 20, 2015 4:48am
Quoting palabara
{quote}

Its up to you to protect yourself not for someone else to do it.

Now how can a trader expect to trade with unforeseeable risk, its the nature of the beast.

As a trader you need to understand ALL the risk that is involved from your broker all the way to the market to the crazy minds of Central bankers.
Was just wondering if you could elaborate on the above 3 points you made?

1) How does one protect themselves? You mentioned you have to understand all the risk.. but what are these and where do you find them out?

2) Also, are you suggesting that this is a continuous risk you have to take while trading Forex?

3) Are there any prevention methods? surely it wasn't just luck people were not trading it at this time? (news? etc?)

Thanks for the detailed reply,
  • #9
  • Mar 20, 2015 9:46am Mar 20, 2015 9:46am
You cannot control slippage, it is at the brokers discretion. If you want to try and avoid it, trade during times where there is not high volatility. I don't think your concern is slippage, your concern is when liquidity dries up and your broker cannot fill your stop. If you are that worried trade an account with high leverage and deposit a small amount, keep the rest of your capital in a bank account.
  • #10
  • Edited 12:06pm Mar 20, 2015 10:33am | Edited 12:06pm
Quoting flinx
{quote} Was just wondering if you could elaborate on the above 3 points you made? 1) How does one protect themselves? You mentioned you have to understand all the risk.. but what are these and where do you find them out? 2) Also, are you suggesting that this is a continuous risk you have to take while trading Forex? 3) Are there any prevention methods? surely it wasn't just luck people were not trading it at this time? (news? etc?) Thanks for the detailed reply,
I'll try to tackle the questions 1 by 1. I can only answer them from my experience and knowledge and not base it on a whole for everyone so this are individualized answers.

1) First you need to acknowledge that the worst thing you can imagine can happen, doesn't mean that it will, but it "can" a lot of people think things that are improbable or unlikely that wont happen, just wont happen. I on the other hand believe that worst case scenario is always a possibility. So what is worst case scenario. the CHF flash crash could have been one.. The events of 2007 when the housing bubble burst is another example.

There is many ways to protect yourself essentially you never wish to keep all your capital in one account ( you know don't keep all your eggs in one basket cause if it drops all your eggs are gone) 2nd don't keep ALL your money in the accounts either 3rd have money on the side all in all what your doing is if anything happens all it causes is a speed bump yes losing money sucks yes unforeseeable events suck, but you were ready for them. Its like being those apocalypse guys only your doing the same with money your making sure if the worst happens it wont hurt it will sting, but your protected. Make sure to have more then one broker.. If one goes belly up same thing your protected.

2) Absolutely Forex is 24 hours 6 days a week market. It crosses 3 time zones it based on economical stability or therefore lack off. Anything can happen at any time, An earthquake some where, stock market crash, tidal wave, all this can cause instability in a country and will cause the market to react. Doesn't mean the events will be as drastic, but there is always a level of risk and it changes in magnitude not all events happen in a flash, but sometimes it takes longer and people still don't see them coming.

3) I can't speak for all people. I wasn't trading it at the time, because I knew that it was unsustainable, I didn't know that they will pull the carpet underneath everyone, but I did know that the peg would succumb to much pressure and at worst it would bend and maybe even bend a lot. Not all events are linked to an alert system. We are used to know or anticipate events and take precautions or even trade the risk. Years ago things used to be a lot more volatile then they are now. There was a lot more unexpected movements, and volatility but after 2010 things have more or less mellowed out, and some people are a bit complacent. Waiting in anticipation for events as opposed to always being on the guard.

Forex market is even though lost some ground still the largest market in the world. It is still very volatile, things are different now then they are used to be the market is always very dynamic. It constantly shifts and changes, we are faced with most manipulation that has been ever succumb to forex. On top of it all were in a currency war.. Everyone is looking for the easy injection and those who got to experience the joy of cash wants it back.. So as China is losing grip others are trying to fill in the gap by following the same foot steps cheap labor. Other countries are trying to re-grow GDP which is done with inflation which is hard to do when everyone is trying to compete with the lowest price.. Consumer wins but economy wise it creates rifts and gaps.

My advice is learning the demo is great, but read books like Market Wizards -- Learn macro economics - Geopolitics - and catch up on current events for the last 10 years. The more knowledge the better you are equipped, yes its a lot of work. Forex isn't an overnight success story, a lot of people want it to be. I wanted it to be, but reality it took me a lot of learning a lot of years and a lot of tears lol. You stick with it, you tackle it and wrangle with it, and always keep your eye on the goal.
There are those who know, and there are those who don't know.
  • #11
  • Mar 21, 2015 12:59am Mar 21, 2015 12:59am
Quoting palabara
{quote}Now there is no guarantees, no one can guarantee you something that is unforeseeable, and if they do.. well I personally wouldn't trust it.
If you're outside the US, IG Markets do offer guaranteed stops as well as regular ones. They're expensive (additional spread) if you want to use them but they protect against slippage regardless of the liquidity. If you trade against a pegged currency then you might want to have a look at them.

IG is a $4 bn listed UK company that's been around for 40 years. They lost about $50m through the CHF debacle but their shares barely budged.
  • #12
  • Mar 21, 2015 9:24am Mar 21, 2015 9:24am
Quoting flinx
Hi all, Starting to get serious into trading and looking at moving from demo to real money. The single biggest worry I have right now is slippage. witnessing the EURCHF crash .... Hope to hear your thoughts, Thanks
This is why most of us stay away from the markets just before and after the big ticket announcements. The CHF crash was just the result, the central bank's decision being the cause and of course, no one expected the crash which is rather ironical since "crashes" are part of any market and should be expected. Given that, it would make sense to limit your trading account and either park some of the funds in a dormant account, bank or try up an online option. The point being that some brokerages offer negative balance protection which is just fancy words for "well what can we do?"..so it makes sense, esp if your fund runs into tens of thousands of dollars to make sure you stay protected. Guaranteed stops are one way to go about that..so make sure your broker offers the same..
  • #13
  • Edited 12:15pm Mar 21, 2015 12:02pm | Edited 12:15pm
Quoting actalis
{quote} If you're outside the US, IG Markets do offer guaranteed stops as well as regular ones. They're expensive (additional spread) if you want to use them but they protect against slippage regardless of the liquidity. If you trade against a pegged currency then you might want to have a look at them. IG is a $4 bn listed UK company that's been around for 40 years. They lost about $50m through the CHF debacle but their shares barely budged.
I don't trust anything in the markets that is "guaranteed" its only as good as its enforcement. There is a lack of that, and granted there is reputation, but things goes south its everyone on their own. Being some what pessimistic helps with survival.
There are those who know, and there are those who don't know.
  • #14
  • Mar 21, 2015 12:52pm Mar 21, 2015 12:52pm
Quoting palabara
{quote} I don't trust anything in the markets that is "guaranteed" its only as good as its enforcement. There is a lack of that, and granted there is reputation, but things goes south its everyone on their own. Being some what pessimistic helps with survival.
Well sure but by the same token your broker is not safe, your bank is not safe and we should all stash our gold under our mattress...
  • #15
  • Mar 21, 2015 1:10pm Mar 21, 2015 1:10pm
Quoting actalis
{quote} Well sure but by the same token your broker is not safe, your bank is not safe and we should all stash our gold under our mattress...
I definitely don't disagree! being aware and prepared for the worst possible case. People discover it all the time take Russia for instance.
There are those who know, and there are those who don't know.
  • #16
  • Mar 22, 2015 4:20pm Mar 22, 2015 4:20pm
Quoting palabara
{quote} I'll try to tackle the questions 1 by 1. I can only answer them from my experience and knowledge and not base it on a whole for everyone so this are individualized answers. 1) First you need to acknowledge that the worst thing you can imagine can happen, doesn't mean that it will, but it "can" a lot of people think things that are improbable or unlikely that wont happen, just wont happen. I on the other hand believe that worst case scenario is always a possibility. So what is worst case scenario. the CHF flash crash could have been one.....
Great reading thanks very much for the reply.

I just have some follow up questions based on what you've said perhaps you could help when you have the time?

1) I understand what you are saying here, however say I'm trading $10 a pip which works out at 2% risk, if the market fell like EUR did, that's a $20,000+ bill, so how would separating my money into different accounts prevent this? How would I ever have enough money, or know how much to keep on the side incase of an event like this? How could I limit such a thing to just a 'sting' as you say, apposed to a full on blow up?

I can't really say okay - heres $1000 account for me to trade with, but I now need to save another $30,000 in order to cover any potential big gaps (if you see what I'm saying?)

3) Where did you find out/learn that this market was pegged/unsustainable? is there some sort of website with info/warnings etc about currency pair issues etc? (I had never even heard of a pegged market until afterwards - it never really seems to get mentioned anywhere until it's too late)
I don't really want to get into guaranteed stops... because I've read they are not quite the bells and whistles they seem.


Looking forward to hearing back,
  • #17
  • Mar 22, 2015 9:31pm Mar 22, 2015 9:31pm
Quoting flinx
{quote} Great reading thanks very much for the reply. I just have some follow up questions based on what you've said perhaps you could help when you have the time? 1) I understand what you are saying here, however say I'm trading $10 a pip which works out at 2% risk, if the market fell like EUR did, that's a $20,000+ bill, so how would separating my money into different accounts prevent this? How would I ever have enough money, or know how much to keep on the side incase of an event like this? How could I limit such a thing to just a 'sting' as...
Alright so for your 1st question, I don't think you'll like my answer, but if you cant replenish $10 per pip which does require a certain amount at minimum $20,000. I don't think you should be trading $10 per pip reason being is that the events like CHF are extremely rare and your more then likely to lose your money like a poker player bleeds chips either you'll go all in or keep calling either way same scenario. The bottom line is, you cant feel a sting if you put it all on the line.. What you should do is you should build up to it yes its not as fun or rewarding as being a high player, but if you can build up to it then when you get to that point A) you'll be able to function on that level and B) you'll have all the capital you require. If you don't you might as well go to a casino at least you'll have more enjoyment losing the money.
As I stated before, I am speaking from experience and this is just my opinion on the matter. Its not something people want to hear but the truth is bitter sweet.

Further more if there is a gap you wish to separate your trading and only trade few currencies per account. Personally I trade 3 currencies per account, so if one of them would be a bomb and go boom like CHF did it only hurts 1 of my accounts.. I still have many others.. Trading all in one account is a way of disaster but trading only few currencies per account also helps keeps things more objective you treat them separably so you don't have biases. Like for example I can be long EUR/USD on one account and short EUR/AUD on another account a person who trades both on same account would have a conflict of feelings.. If his bias long euro wouldnt take a short euro on another cross even though it can be irrelevant each currency has its own weighted average 100 pip move up on EUR will only move EUR/AUD 50 pips.. if my predetermined DD which is a lot more its just Pre-calculated drawdown..

It wasn't a secret SNB initially announced 3 years ago that they will maintain a peg on EUR/CHF and not let it drop past 1.20 the announcement was made when the euro fell to 1.22 before going back to 1.40 at which point putting pressure on the EUR/CHF cross and at the moment they announced they will keep it from being breached then they kept it until that moment 3 days before they pulled the flash crash they have announced reaffirmation that they will continue to hold the peg and then boom surprise we lied.

When they announced it, was skeptical my thoughts were its going to bend. They wanted to falsely reassure the markets that even though EURO is going to do QE that they will maintain the peg regardless of the amounts of pressure the problem with that notion is that you don't know how low the euro can go and with each move down more pressure on EUR/CHF = More money they have to sink into it too keep the peg and its just doesn't make sense for them to turn on printing press and keep printing money to hold the peg so I figured it will dip to 1.19 maybe 1.18 maybe 1.17 they'll still keep control but let it be measured, and if I had to guess they probably entertained that idea until they decided that its just better to let it drop and then will re-gain control on it which they did.. CHF is still under SNB control only they managed to wave out a lot of the market pressure and manipulate it more easily.

Everything that is going on at the markets is no secret FF (Forex Factory) Has news from different outlets all on the front page. Just need to be able to interpret the relevant from the irrelevant the high impact from the low and the long term from the short term.

Its a lot of information, and don't get me wrong wish it could all be "observed" instantly but it doesn't work like that. Requires a lot of learning and knowing what to look for, reading between the lines and asserting market intention. As I've stated earlier this markets are not designed to be ATM for retail traders, need to learn the workings of the complex in order to be able to "survive" and then only thrive.
There are those who know, and there are those who don't know.
  • #18
  • Mar 23, 2015 2:34am Mar 23, 2015 2:34am
use oanda..
  • #19
  • Mar 23, 2015 3:36am Mar 23, 2015 3:36am
Close down your charts, turn off your computer and go outside.
  • #20
  • Mar 23, 2015 1:43pm Mar 23, 2015 1:43pm
Quoting palabara
{quote} so if one of them would be a bomb and go boom like CHF did it only hurts 1 of my accounts.. I still have many others
I understand what you are saying here, however it was the negative equity that got people? regardless of how many accounts you have, it wouldn't blow up just that one account as it would enter negative equity that would require the money from all the others you own?
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