Avoiding negative balance? Slippage? How do you do it? | Forex Factory

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Avoiding negative balance? Slippage? How do you do it?

  • #1
  • First Post: Jun 21, 2015 12:21pm Jun 21, 2015 12:21pm
Hi all,

I posted a similar question a few months back but no real conclusion was drawn. As you all know, the markets are dangerous places. Stop losses don't, and won't always work. Slippage does and will happen. When slippage is a few hundred pips it's manageable, a bad day, but when caught in a 'black-swan' event - such as the EUR/CHF crash, you could be slipped -2000 pips... which could, and did put many many people into negative equity. (Especially if trading at 2% a trade with small targets/stops)

My question then, is how do you treat and prepare for inevitable black-swan events?

I presume people must have something in place - seems silly people trading in the hope of making a profit and the potential of losing everything you own (house etc.) through negative equity claims!
  • #2
  • Jun 21, 2015 12:28pm Jun 21, 2015 12:28pm
1-trade what you offer to lose and dont change your life style.
2-dont ever never take a loan to trade or sell an asset like a car or a house .
3-this market will make you rich by time only so dont put a range hoping to make millions act with it as a habit for more income.
4-use stop loss and dont over leverage i use 25 :1 as maximum .
5-watch for news time and get out in that time and enter after it .
6-enjoy trading as an art a hobby and a passion.
this is my advice
all have a nice day
focus while relaxed to see better
  • #3
  • Jun 21, 2015 12:30pm Jun 21, 2015 12:30pm
Hi,

Sorry, this doesn't appear very relevant to my question. For example 'trade what you offer to lose' isn't applicable with negative equity, as the clear issue is it's more than you are willing to lose. I don't mind depositing 5,000 and losing it, but what I do mind is depositing 5,000 and owing 25,000!
  • #4
  • Jun 21, 2015 12:57pm Jun 21, 2015 12:57pm
Quoting flinx
Hi all, I posted a similar question a few months back but no real conclusion was drawn. As you all know, the markets are dangerous places. Stop losses don't, and won't always work. Slippage does and will happen. When slippage is a few hundred pips it's manageable, a bad day, but when caught in a 'black-swan' event - such as the EUR/CHF crash, you could be slipped -2000 pips... which could, and did put many many people into negative equity. (Especially if trading at 2% a trade with small targets/stops) My question then, is how do you treat and prepare...
If this is of concern to you, consider seeking out a broker offering negative balance protection. This may introduce some issues of its own (broker model), but nevertheless it is an option. You may also want to examine which brokers forgave negative balances in the wake of CHF fiasco (although past practice doesn't guarantee the same in the future).

As someone still waiting for a payout from Alpari's collapse, you could also add that to your list of worries even if you don't go into negative equity
  • #5
  • Jun 21, 2015 1:00pm Jun 21, 2015 1:00pm
Quoting honestknave
{quote} If this is of concern to you, consider seeking out a broker offering negative balance protection. This may introduce some issues of its own (broker model), but nevertheless it is an option. You may also want to examine which brokers forgave negative balances in the wake of CHF fiasco (although past practice doesn't guarantee the same in the future). As someone still waiting for a payout from Alpari's collapse, you could also add that to your list of worries even if you don't go into negative equity
My heart goes out to people like you. I do hear however that Alpari is in the process of paying people out now.
Negative Balance Protection accounts seem really the only option I know of.. (without basically trading at 1:1 leverage anyway).
I don't however know many (if any) brokers that offer true negative balance protection. The only one I do know of is FxPro.

Does anyone else know any others?
  • #6
  • Jun 21, 2015 1:11pm Jun 21, 2015 1:11pm
Hi

if you use small leverage with excess money you will not end owning much
all have a nice day
focus while relaxed to see better
  • #7
  • Jun 21, 2015 1:48pm Jun 21, 2015 1:48pm
Avoid pegged currency's. That should keep you safe enough. TBH I don't think well see a repeat anytime soon. I think it hit the whole monetary system a lot more than anticipated and they realised that.
  • #8
  • Jun 21, 2015 6:44pm Jun 21, 2015 6:44pm
Quoting Spoon138
Avoid pegged currency's. That should keep you safe enough. TBH I don't think well see a repeat anytime soon. I think it hit the whole monetary system a lot more than anticipated and they realised that.
Is there a list of pegged currencies somewhere? If not, can you mention some pegged currencies you know about?
  • #9
  • Jun 21, 2015 7:04pm Jun 21, 2015 7:04pm
Found this one:

http://www.investmentfrontier.com/20...xchange-rates/
  • #10
  • Jun 21, 2015 7:19pm Jun 21, 2015 7:19pm
So it seems that we are safe with majors and the most traded currencies? The only currency that surprised me a little bit in that list is the Danish krona (DKK).
  • #11
  • Jun 21, 2015 7:24pm Jun 21, 2015 7:24pm
Found a bigger list: https://en.m.wikipedia.org/wiki/Cate..._exchange_rate
  • #12
  • Jun 21, 2015 8:16pm Jun 21, 2015 8:16pm
I have a similar question as OP, what if your sl is 2/3 pips and leverage is 1:50. Theres an unscheduled random negative news(not necessary de-peg) and say theres a huge spike with slippage in excess of > 200 pips, how do you protect yourself from financial disaster besides zeroing your account? If trading the <5m tf thats the constant worry since snb. Share your thoughts please.
  • #13
  • Jun 21, 2015 8:40pm Jun 21, 2015 8:40pm
Quoting flinx
My question then, is how do you treat and prepare for inevitable black-swan events?
//-----

hey flinx..... if the risk of such an event was high, you could always trade options on the currency..... there your only risk is the cost of the contract.... it can not be more..... there will be no margin call..... but the profit potential is technically unlimited.....

very very few people trade forex options.... and i mean very very few...... have mentioned this many times and posted the open interest on some pairs....

you can double your money there, but the typical success rate is no better than spot forex..... the same vices that afflict spot traders afflicts option traders......

selling options should best be left to the pro's....... buying puts or calls in the direction of the trend can improve your chances.....h

//-----

Three key patterns emerge from this study: (1) on average, three out of every four options held to expiration end up worthless; (2) the share of puts and calls that expired worthless is influenced by the primary trend of the underlying; and (3) option sellers still come out ahead even when the seller is going against the trend.


http://www.investopedia.com/articles.../03/100103.asp
to trade and code, keep both simple... no call to impress....h
  • #14
  • Jun 21, 2015 8:52pm Jun 21, 2015 8:52pm
^^^
Before you pimp your options idea.....

Its actually worse than trading the spot. Finding fair pricing of exotics is difficult and harder to model. Plus there is the added element of time constraining the position. You will be hard pressed to find fair prices in most retail outfits offering exotics.
  • #15
  • Jun 21, 2015 9:32pm Jun 21, 2015 9:32pm
Quoting MidKnight
^^^ Before you pimp your options idea..... Its actually worse than trading the spot. Finding fair pricing of exotics is difficult and harder to model. Plus there is the added element of time constraining the position. You will be hard pressed to find fair prices in most retail outfits offering exotics.
//-----

wasn't pimping anything..... just answering flinx's direct question ...... My question then, is how do you treat and prepare for inevitable black-swan events?

trading exotics of any type in any form does not appeal to me......

whether it's worse than spot depends on the trader's experience in both..... my forex option's $ related returns far out weigh my spot returns..... and my oex trading triples that.....

there is no shortage of people saying it is equally impossible to be successful trading spot..... my live explorers will always be fully public for the sole purpose of proving the opposite.....h
to trade and code, keep both simple... no call to impress....h
  • #16
  • Jun 21, 2015 10:05pm Jun 21, 2015 10:05pm
scared traders don't make money
  • #17
  • Jun 21, 2015 11:17pm Jun 21, 2015 11:17pm
Having a broker with "negative balance protection" actually gives you a big time edge, especially if they offer high leverage. Can anyone take a guess as far as what the edge is?
Men lie, women lie, the numbers don't.
  • #18
  • Jun 21, 2015 11:23pm Jun 21, 2015 11:23pm
just whack it with maximum leverage using small amount and hope that u multiply it 10x, rinse and repeat?

but it won't survive spread widening if thats what you're thinking.
  • #19
  • Jun 21, 2015 11:38pm Jun 21, 2015 11:38pm
Quoting cprcrack
{quote} Is there a list of pegged currencies somewhere? If not, can you mention some pegged currencies you know about?
Staying away from "pegged" currencies is a good start, but the sad reality is that currencies which aren't pegged like USD/JPY and eur/jpy have had a history of having spreads of more then 800 pips at a time. I believe it was 2011 when the nuclear reactor was said to be ready to melt down in Japan it caused a massive drop in USD/JPY about 333 pips in 15 mins, but one thing you would never be able to back test was the spread. Some people (if you search long enough here on ff.com) reported having spreads be as tight as .1 pip during 1 tick and the next tick over 800 pips) So peg or no peg, if you are using any type of leverage and if you have pending orders open your account will be hammered to the point of no return.
Men lie, women lie, the numbers don't.
  • #20
  • Jun 22, 2015 12:42am Jun 22, 2015 12:42am
I started using a Spread Betting account about six months ago as another way of trading currencies. Events like the SNB move a while back has made me ultra weary.
The Spread Betting account I use allows Guaranteed Stops on all my trades. It does what it says on the tin - no matter what happens you can only lose the stop you originally set. It costs a coulpe of pips more on the spread for the privilege of setting a Guaranteed Stop but in these days of unpredictable volatility, it's worth it for piece of mind.
I should point out that at times of expected volatility (news), the Guaranteed Stop minimum level from a new entry can jump quite a lot, (I'm not talking about the spread here although that can widen also). For the Euro/Usd pair the Guaranteed Stop minimum is normally about 10 pips with a 2 pip spread increase on the normal 0.8 pip. It varies on other currency pairs.
Neeless to say, I place a Guaranteed Stop on all my trades during these crazy times. No need to worry about SNB type events.
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