How to avoid market crash? | Forex Factory

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How to avoid market crash?

  • #1
  • First Post: Mar 22, 2016 2:54pm Mar 22, 2016 2:54pm
I have been thinking. Even if one was to trade for 5 years straight in profit, but one of those flash crash in 2010, swiss black swan in 2015 and other black swans would pretty much clean your account and furthermore, you may end up even owing the broker money because the volatility was too high for closing orders...

I am wondering how would you as a trader avoid these situations? I know one of them is to analyze global situations from economic perspective. However, not everyone understands the cause/reaction of these events around the world.
  • #2
  • Mar 22, 2016 4:11pm Mar 22, 2016 4:11pm
hedge your positions by using puts and calls, is one way you could do it.
that is how the big boys do or simply be on the right side of the crash.
Bulls are stupid Animals!especially when Im short!
  • #3
  • Mar 22, 2016 4:18pm Mar 22, 2016 4:18pm
Low leverage is the key to longevity
  • #4
  • Mar 22, 2016 4:56pm Mar 22, 2016 4:56pm
Quoting duy90
I have been thinking. Even if one was to trade for 5 years straight in profit, but one of those flash crash in 2010, swiss black swan in 2015 and other black swans would pretty much clean your account and furthermore, you may end up even owing the broker money because the volatility was too high for closing orders... I am wondering how would you as a trader avoid these situations? I know one of them is to analyze global situations from economic perspective. However, not everyone understands the cause/reaction of these events around the world.
it goes both ways! can lose a lot or make a lot, the problem is not trying to avoid but using the proper risk management.
All posts are my personal opinion
  • #5
  • Mar 22, 2016 10:31pm Mar 22, 2016 10:31pm
Or simply use a guaranteed stop loss

(or as roughtrader said, use vertical spreads on options).
  • #6
  • Mar 22, 2016 11:32pm Mar 22, 2016 11:32pm
Correct use and distribute risks. Trading by pending orders will help you be prepared for any market behavior. What about the global news, then you need to follow them. Delve or not - this is a private matter, but to make a correct inference - it must be able to.
  • #7
  • Mar 23, 2016 7:16am Mar 23, 2016 7:16am
Quoting duy90
I am wondering how would you as a trader avoid these situations?
The best way to avoid market crashes and such situations is to stop trading.
  • #8
  • Mar 23, 2016 11:04am Mar 23, 2016 11:04am
1. Trade smaller position sizes (e.g. less than 1% equity per trade). Understand that a stoploss won't necessarily save you, as execution of all order types depends on currently available liquidity.

2. Deposit only a small portion (e.g. 10%-20%) of your trading funds with your br0ker; hold the rest in reserve in an on-call bank account. (It's inexpensive enough to wire more funds if you go into drawdown).

3. Choose your br0ker carefully. Large br0kers that allow trading in several market types (diversification) offer a little more protection. Read the small print in your agreement, e.g. with some br0kers your liability is limited to the funds in your account, with others it is potentially unlimited.
  • #9
  • Mar 23, 2016 11:58am Mar 23, 2016 11:58am
So good reply about carefully with broker's conditions. And one more... Do not be greedy. And trade with pleasure!
  • #10
  • Mar 23, 2016 1:53pm Mar 23, 2016 1:53pm
Those things happened to the stock market not Forex. The EurChf disaster was predictable because of the peg.
  • #11
  • Mar 23, 2016 4:45pm Mar 23, 2016 4:45pm
Quoting HeyYou
Those things happened to the stock market not Forex. The EurChf disaster was predictable because of the peg.
Before the peg was removed, buying EURCHF at 1.20 was a no brainer trade. The SNB gave no warning that they would remove the peg -- in fact, they gave the opposite indication just a week or so beforehand -- but when it was suddenly removed, CHF spiked to somewhere nearer fair value, and buyers got burned. For the disaster to be "predictable" you would have needed to know the undisclosed intentions of the SNB. I had no real money trades open at the time, but I still lost money when Alpari UK went under.
  • #12
  • Mar 23, 2016 5:31pm Mar 23, 2016 5:31pm
Quoting hanover
1. Trade smaller position sizes (e.g. less than 1% equity per trade). Understand that a stoploss won't necessarily save you, as execution of all order types depends on currently available liquidity. 2. Deposit only a small portion (e.g. 10%-20%) of your trading funds with your br0ker; hold the rest in reserve in an on-call bank account. (It's inexpensive enough to wire more funds if you go into drawdown). 3. Choose your br0ker carefully. Large br0kers that allow trading in several market types (diversification) offer a little more protection. Read...
Which broker you would recommend? I have been looking for another broker. I am currently reviewing these

Tickmill
globalprime
axitrader
icmarkets
xtb (only broker that made money from the CHF crisis)
finfx
  • #13
  • Mar 23, 2016 5:35pm Mar 23, 2016 5:35pm
Quoting duy90
{quote} Which broker you would recommend? I have been looking for another broker. I am currently reviewing these Tickmill globalprime axitrader icmarkets xtb (only broker that made money from the CHF crisis) finfx
xtb only broker that made money from the CHF crisis!!!
how this dude?
Investing is SIMPLE but NOT EASY
  • #14
  • Mar 23, 2016 5:38pm Mar 23, 2016 5:38pm
Quoting Moly_Cam5
{quote} xtb only broker that made money from the CHF crisis!!! how this dude?
appearantly they have analysis team for economic outlook.I bet just inside info or something Sorry i took closer look at the website and it seems couple other brokers/banks earned some millions as well. My bad


http://www.financemagnates.com/forex...-time-updates/

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  • #15
  • Mar 23, 2016 8:05pm Mar 23, 2016 8:05pm
Quoting duy90
{quote} Which broker you would recommend? I have been looking for another broker. I am currently reviewing these Tickmill globalprime axitrader icmarkets xtb (only broker that made money from the CHF crisis) finfx
I have had live accounts intermittently with Pepperstone and AxiTrader since 2012, and I've had no problems with either. However, I don't scalp or news trade, and I trade small positions only.
  • #16
  • Mar 23, 2016 8:18pm Mar 23, 2016 8:18pm
Quoting roughtrader
hedge your positions by using puts and calls, is one way you could do it. that is how the big boys do or simply be on the right side of the crash.
anybody can hedge against large market moves using ^VIX derivatives - my faves are the CBOE VIX options, and options on VXX, UVXY, SVXY, etc...
"If The Fool persists in his Folly he will become wise." - William Blake
  • #17
  • Mar 24, 2016 1:53am Mar 24, 2016 1:53am
Quoting hanover
{quote} Before the peg was removed, buying EURCHF at 1.20 was a no brainer trade. The SNB gave no warning that they would remove the peg -- in fact, they gave the opposite indication just a week or so beforehand -- but when it was suddenly removed, CHF spiked to somewhere nearer fair value, and buyers got burned. For the disaster to be "predictable" you would have needed to know the undisclosed intentions of the SNB. I had no real money trades open at the time, but I still lost money when Alpari UK went under.
Pegged currencies can be de-pegged at any time, so it's obviously risky! I know many people didn't get it before jan 2015, but some did .


Personally I don't like pegged currencies simply because they kind create a "fake" market. no wonder most of the pegged currencies are those of 3rd world countries...
  • #18
  • Mar 24, 2016 2:23am Mar 24, 2016 2:23am
Quoting HeyYou
{quote} Pegged currencies can be de-pegged at any time, so it's obviously risky! I know many people didn't get it before jan 2015, but some did . Personally I don't like pegged currencies simply because they kind create a "fake" market. no wonder most of the pegged currencies are those of 3rd world countries...
Agreed.

Also, if I recall correctly, the announcement of the ECB's QE package was imminent around that time, hence a consequent SNB reaction was highly possible, making any CHF based trade potentially even more risky.
  • #19
  • Oct 24, 2016 7:24pm Oct 24, 2016 7:24pm
Quoting Atokys
{quote} The best way to avoid market crashes and such situations is to stop trading.
Correct.
  • #20
  • Oct 24, 2016 9:16pm Oct 24, 2016 9:16pm
If the trader in question is unaccustomed to trading prior during or after volatile events I suggest the following:

For scheduled (known before they happen) News Events that are of High Impact such as Brexit, and the Swiss Crash for example.. one can either observe and keep track of the News Events before they happen, or use automation to keep track of News Events... and of course then leave a solid buffer of time before and after such events where one does not trade.

Rule of thumb:
if a Trader is unsure of a trade, system, potential volatility of a news event, or anything else that pertains to trading... simply have enough discipline to sit and wait out of the market, you Never lose when you take a moment to sit out of the market, not participating is greater than participating and getting beat a a situation the trader is under prepared for

Also, splitting your funds with multiple Brokers is a great way to reduce one's risk of getting caught with a Broker that goes under
A Positive Mind, and Positive Spirit lead to True Happiness
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