{quote} Mastermind, I'm curious, are you prepared for a potential flash crash of 500 pips at 7lots (approx the GBP flash crash)? What is that, 35k loss if you're in the wrong direction? What do you have in your business plan to handle those black swan events?
This current trading account is one such example.
So if a black swan type event struck sure it would hurt a bit (more annoying than anything else) however the loss would simply be a reduction in realized gains.
This would be a different situation altogether in the case where a trader might have transferred his/her superannuation of say 200K into their first trading account and then shortly after a black swan strikes wiping out 35-50K.
To some extent it is relative.
The CHF crash.
The Brexit crash was somewhat avoidable.
The GBP flash crash however was not.
Any trader who had open or pending orders on the pound that day would have suffered losses within a 60 second time interval.
It is impossible (read that as IT IS IMPOSSIBLE) to avoid a future flash crash of that type.
This is a good reason to explain to others how dangerous trading can be.
The only way you could ever avoid such a flash crash is to either not trade that currency on that particular day or NOT trade at all.
I live in a world of probability and I know that such a repeatable event is highly unlikely BUT I also am smart enough to know that it is very possible to occur again.
I suggest that traders should generate trading profit (obviously from an initial account) and then attempt to build it as fast as possible using a careful trading methodology and then transfer the profits into another account and simply trade with it.
Better yet is to use some of the profit gained from other more traditional type investments such as stocks and bonds.
If a flash crash occurs a trader only stands to lose gained profits and not their nest egg!
If the flash crash occurs on the very first account .... then I'm sorry to say but you will need to start all over again.
Eventually you should be able to generate enough profit before such an event occurs again because they do not happen that often ... thankfully.
Hope that sheds a little light on the subject.
ps. recall that money traded in the FX market should only ever be money that you are prepared to lose and that will in no way impact on your life.
pps. you are right 500 pips @ 7 lots say on the euro would cost me close to 35K!
Masterrmind............
Master your Mind then Master your Trades
... I'm glad I took it dough because I did not see the rotation I want afterwards.
