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Black Swan - Are you prepared?

  • #41
  • Oct 17, 2016 3:51pm Oct 17, 2016 3:51pm
Quoting Calculus
{quote} There's another big anti-black swan strategy in-built to short term trading Jens and that's your stop is going to be relatively close (I would think) to the current price. So a trader might be long Cable at 1.2240 looking for a short term pop up to 1.2260+ and be working a 5-20 tick stop. In the 30sec-120sec time period before any of these mega moves you often get some real jumping in the price and that would more than likely take the trader out either right around his stop or with no more than 10-20 ticks of slippage (remember, price will...
Interesting...could be wishfull thinking....
  • #42
  • Oct 17, 2016 3:55pm Oct 17, 2016 3:55pm
Quoting JensG
{quote} First of all, there is risk to trading just as there is risk in every other business. You can't eliminate risk but you can lower it. Second: Blowing your account is not the problem, getting in huge debt is. Lowering risk: I'm a short term trader, I have an average holding time between 5 and 15 min probably (haven't looked at my trade history, but that should be pretty close I think). That alone lowers my risk significantly. Ultimately I'm more often flat than having any market exposure. Some people say these black swans come without any...

That was the first professional answer I read in this thread!!!!
Everyone should read this twice....and memorize it....
  • #43
  • Oct 17, 2016 3:58pm Oct 17, 2016 3:58pm
Quoting mambomango
{quote} thats not wrong, its your problem when you choose a broker who chases you to pay for negative balance.
OK... find one that won´t please!!!
Read the fine printing...if they "forgive" you you are just lucky...they are legally authorised to clame it...go out there and ask them...specially ecn s...
Please
Wake up....
  • #44
  • Oct 17, 2016 6:50pm Oct 17, 2016 6:50pm
oh well, here is another thought.

what if i tell you that,
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  • #45
  • Oct 18, 2016 3:47am Oct 18, 2016 3:47am
The problem is that if you set your trading to be able to survive a 1000 pips slippage , Its impossible to profit more than 30% a year. The black swan must not happen in at least 3 or 4 years to be consistent profit . The problem is that black swans are flying twice a year ...
  • #46
  • Oct 18, 2016 6:52am Oct 18, 2016 6:52am
Quoting PayTheLimit
The writing is on the wall. These events will continue to happen from time to time, burning accounts and whole firms. Liquidity is still good in FX, but like so many markets these days, it vanishes in seconds. I for one have started to cut down my FX exposure to trading one lots, just not interested in something blowing up in my face anymore. I've had numerous close calls, and have withstood Refco, Man, and Alpari, but I feel like I'm pressing my luck. You not safe anywhere really, but I'm heading to the sidelines to take stock of things before...
Hi PTL,

there is Guaranteed stop loss for some brokers, isn't this keep us from getting slippage in the event of black swan?
  • #47
  • Oct 18, 2016 7:46am Oct 18, 2016 7:46am
Quoting Jayko
{quote} Hi PTL, there is Guaranteed stop loss for some brokers, isn't this keep us from getting slippage in the event of black swan?
There is no such thing as guaranteed stop loss. Read their Terms&Conditions - usually it's during normal market conditions only. During black swan event - business as usual - blown accounts and huge losses. Don't count on this.
Low leverage is a key in this case. But this cannot be explained to some "traders" with $200 account and 1:400 leverage.
  • #48
  • Oct 18, 2016 8:03am Oct 18, 2016 8:03am
Quoting johnnycash
{quote} There is no such thing as guaranteed stop loss. Read their Terms&Conditions - usually it's during normal market conditions only. During black swan event - business as usual - blown accounts and huge losses. Don't count on this. Low leverage is a key in this case. But this cannot be explained to some "traders" with $200 account and 1:400 leverage.
The leverage is the least important. The risk is the key word here.
High leverage is actualy a good thing, providing you know what your doing...
  • #49
  • Oct 18, 2016 8:29am Oct 18, 2016 8:29am
I said it before: If you want absolute protection against ending up in debt use a legal structure with limited liability. Or trade unleveraged

Speaking about leverage, strategies or what not else simply doesn't solve that problem, trading through a company will ultimately separate your trading equity, win & loss from your personal finances (if you want security, that is what you want to do). It comes with a price however - tax gets a little bit more complicating and perhaps a bit more expensive then most people are used to.

For people living in the UK (like me) that however means no more tax free spreadbetting.
  • #50
  • Oct 18, 2016 8:39am Oct 18, 2016 8:39am
Quoting JensG
I said it before: If you want absolute protection against ending up in debt use a legal structure with limited liability. Or trade unleveraged Speaking about leverage, strategies or what not else simply doesn't solve that problem, trading through a company will ultimately separate your trading equity, win & loss from your personal finances (if you want security, that is what you want to do). It comes with a price however - tax gets a little bit more complicating and perhaps a bit more expensive then most people are used to. For people living...
What do you mean "...no more tax free spreadbetting..." ?
Do brokers allow accounts opened by companies instead of indviduals ?
  • #51
  • Oct 18, 2016 9:05am Oct 18, 2016 9:05am
Quoting Zemanel
Do brokers allow accounts opened by companies instead of indviduals ?
Usually they do. Deposit requirements might be a bit higher though.
  • #52
  • Oct 18, 2016 10:22am Oct 18, 2016 10:22am
This is how i do it :

- Instead of one pair, i started to trade 4 pairs. Despite all currencies are more or less correlated and a 1000 pips slippage is going to strike all of them, i pray that when that occurs , i am at diferent stages of my strategy in all the 4 pars.

- I set my positions to not margin call until 1000 pips of slippage.

It should be enough but this year scares me a lot ! After last year CHF event , Brexit and flash crash ! Camon... In one single year that is not yet finished ?!?
That scares me a lot !
  • #53
  • Oct 18, 2016 11:34am Oct 18, 2016 11:34am
Protection against "Black Swan" events and market risks in general. (The professional approach)

1. Educate yourself about all possible market risks and constantly improve your trading skills and strategy! Always remember that stupidity is your number one enemy. (Not the market)

2. Diversification. Split your capital. Keep at least 50% in your bank. (80% recomended). For larger capital (over 100k) - split the remainder between multiple brokers, and manage simultaneously all accounts with trade copier.

3. Stay away form the market during extreme volatility. Always stay informed about the fundamental situation and the potential high risk events. Do not trade against fat tails caused by lack of liquidity.
Only trade during stable and liquid markets. Also stay away from unfamiliar markets. Do not gamble your money on things which you don't understand.

4. Use leverage as a risk management tool!
Learn how to trade/scalp the intraday micro time frames using very tight stops and high leverage - minimum 20:1. (50:1 recomended). Always use hard price stops on every trade. For the major pairs, keep the max stop under 15 pips. (5-10 pips recommended) Also use time stops.

5. Be smart, and take advantage of the exponential growth. Withdraw 10% of the profits each month (if positive for the month).
Withdraw 50% of the ballance every time you double the ballance 2 times in a row (300% profit). Deposit all withdrawn profits back into your bank account.

6. Use the right tools. Know your tools very well! Your tools and platforms are the only real friends your have in this game! Also prepare backup plan for emergency cases. (internet connection, second computer, laptop, phone ect....)
  • #54
  • Oct 18, 2016 11:43am Oct 18, 2016 11:43am
Quoting alphaomega
Protection against "Black Swan" events and market risks in general. (The professional approach) 1. Educate yourself about all possible market risks and constantly improve your trading skills and strategy! Always remember that stupidity is your number one enemy. (Not the market) 2. Diversification. Split your capital. Keep at least 50% in your bank. (80% recomended). For larger capital (over 100k) - split the remainder between multiple brokers, and manage simultaneously all accounts with trade copier. 3. Stay away form the market during extreme volatility....
Theory and more theory...
stay away when a black swan accurs ?!?!? really ?!?!
Withdraw when you have 300% ?!?!? Really ?!?!
  • #55
  • Oct 18, 2016 12:15pm Oct 18, 2016 12:15pm
Quoting Zemanel
{quote} Theory and more theory... stay away when a black swan accurs ?!?!? really ?!?! Withdraw when you have 300% ?!?!? Really ?!?!
Yes, yes yes ! This is not just a theory - it actually WORKS! Most professional traders trade this way. Of course there are variations in the strategy due to personal preferences, but the overall concept is the same.

And by the way 300% is not that hard to achive with scalping. With 50:1 leverage it takes only 200 pips net profit to double the account. (So after 400 pips you have 300% return )
Here is more detailed explanation about this strategy http://www.forexfactory.com/showthre...78#post8612378
  • #56
  • Oct 18, 2016 12:26pm Oct 18, 2016 12:26pm
Quoting alphaomega
With 50:1 leverage it takes only 200 pips net profit to double the account. (So after 400 pips you have 300% return )
Pretty much what I do But I stopped compounding for now. I withdraw whenever I've doubled my account.
  • #57
  • Oct 18, 2016 12:27pm Oct 18, 2016 12:27pm
Quoting alphaomega
{quote} Yes, yes yes ! This is not just a theory - it actually WORKS! Most professional traders trade this way. Of course there are variations in the strategy due to personal preferences, but the overall concept is the same. And by the way 300% is not that hard to achive with scalping. With 50:1 leverage it takes only 200 pips net profit to double the account. (So after 400 pips you have 300% return ) Here is more detailed explanation about this strategy http://www.forexfactory.com/showthre...78#post8612378...
In that strategy you say that the accuracy must be 60% in a 1:1 risk reward.
That is highly improbable
  • #58
  • Edited 12:47pm Oct 18, 2016 12:34pm | Edited 12:47pm
Wait, I'm pretty sure someone also said this above but: couldn't you just make sure to always have 300% reserve or some large percentage available of whatever you commit? IE
1.) I'm committing $500 to trade with, I have $1500 in store in an interest bearing account.
-I'm pretty sure that means I start with around 0.10 lot size in EURUSD.
2.) I keep my leverage to 1:10 MAX.
3.) Once you have $2500:
a. can commit to $1000 (double size trading)
-0.20 lot size EURUSD.
b. safety fund then backs out $1500 of this and is: 1500+1500 (existing) = $3000 safety fund needed for $1000 commitment.

This way, it would take 30% against to wipe out AND you can usually argue against a negative balance or not always pay it all anyway... so that is a plus for you also.

I suppose with what I recommend (300% safety margin), your leverage becomes 3.33 to 1: which is 10*(500/1500). It seems if you are decent, then you can get to the $2500 in about 9 months. And you can always deposit your own cash over time as long as you preserve the ratios when doing so - so that you can get closer to safely increasing risk more soon.

Why not do this (and keep going over time similar to the model above)?

----------------------------------------------------------------------------------------
The math of making $2500 with 0.10 lot (10k) is this:
Make this per month:
0.028 * 10000 = 280
280 * 9 months = 2520

Making 0.028 once a month seems believable and I've done around that since I started. Am I crazy? Some months could be bigger or smaller so I suppose it could just take you around a year instead of 9 months.
  • #59
  • Oct 18, 2016 10:24pm Oct 18, 2016 10:24pm
Quoting johnnycash
{quote} There is no such thing as guaranteed stop loss. Read their Terms&Conditions - usually it's during normal market conditions only. During black swan event - business as usual - blown accounts and huge losses. Don't count on this. Low leverage is a key in this case. But this cannot be explained to some "traders" with $200 account and 1:400 leverage.
There is really bad news, if it is not what it seems, so there is no insurance for black swan event but keep leverage low or trade at lower time frame to avoid black swan moment. I take note of your advice and always look for big news before placing my trade. thanks and cheers.
  • #60
  • Edited 12:49am Oct 19, 2016 12:28am | Edited 12:49am
Check this out http://www.babypips.com/blogs/pipsyc...ck-swan-losses. If the browsers cannot open it, check 22nd June, 2016 blog of Pipsychology. It's easy to find. Very helpful, in addition to great advice by FF members.
Make all mistakes in demo and rain in pips in live account
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