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A leveraged position on the wrong side can wipe you out with a move like this.

Perhaps it is time to focus on positive-gamma strategies.

Peter P says

A leveraged position on the wrong side can wipe you out with a move like this.

Especially trading an illiquid market where new found volatility can blast pass your stops without looking back.

Swiss franc up 16pct http://www.marketwatch.com/story/yen-falls-against-dollar-euro-as-nikkei-recovers-2015-01-15-2103643?link=sfmw

Graybox says

Peter P says

A leveraged position on the wrong side can wipe you out with a move like this.

Especially trading an illiquid market where new found volatility can blast pass your stops without looking back.

Well, CHF is not normally considered illiquid or exotic. That is the scary part.

Most market participants have a naive understanding of volatility in financial time series. They are unable to comprehend important features like non-normality and heteroscedasticity.

Peter P says

Most market participants have a naive understanding of volatility in financial time series. They are unable to comprehend important features like non-normality and heteroscedasticity.

I know I do, can you splain this to us?

Peter P says

CHF is not normally considered illiquid or exotic

I wasn't really including CHF just a generality, I was speaking more of a equities market which I am positive the large majority invest/trade in if at all.

Peter P says

heteroscedasticity

That is definitely above my pay grade....lol

indigenous says

Peter P says

Most market participants have a naive understanding of volatility in financial time series. They are unable to comprehend important features like non-normality and heteroscedasticity.

I know I do, can you splain this to us?

To start, the distribution of price movement has significant higher-order components like skew and kurtosis. Furthermore, volatility tends to cluster unevenly.

The modern academia is ill-suited to tackle non-linear systems like mass behaviors and financial markets. Sometimes, things are better played than analyzed. :-)

Graybox says

Peter P says

heteroscedasticity

That is definitely above my pay grade....lol

It is just a pretentious word for "variable variability." I am using it here for parody value. :-)

Graybox says

I wasn't really including CHF just a generality, I was speaking more of a equities market which I am positive the large majority invest/trade in if at all.

True. However, many retail traders, especially outside of the US, dabble in currency trading because of the crazy leverage it allows.

BTW, it turns out that retail FX traders as a group have *more* winning trades than losing ones. Most traders are net-losers, so they must be taking profits too soon and allowing losses to snowball.

Peter P says

BTW, it turns out that retail FX traders as a group have *more* winning trades than losing ones. Most traders are net-losers, so they must be taking profits too soon and allowing losses to snowball.

Absolutely and for so many reasons.
Lack of self control and never understanding the concept of the game they are playing.

Where did you learn technical trading?

Is it worth it?

The CHF is still rocketing-I wonder how low it will go? Wonder if this is just the market. it has been a while, almost all the stops must have been blown through by now??

lostand confused says

The CHF is still rocketing-I wonder how low it will go? Wonder if this is just the market. it has been a while, almost all the stops must have been blown through by now??

Blew threw a few accts as well I'm sure. At peak approx. 11 EST. NY session the CHF was the lowest VOL. 85% with nearly 2400% ATR
(7 pairs per ea. collectively).

Graybox says

Blew threw a few accts as well I'm sure. At peak approx. 11 EST. NY session the CHF was the lowest VOL. 85% with nearly 2400% ATR

There will be many unhappy traders all over the world. Watch out for flying bankers.

Swiss Franc strengthens vs gold as gold rises vs dollar.

Peter P says

There will be many unhappy traders all over the world. Watch out for flying bankers.

1 would expect this in small cap and penny stocks, but the currency market....lol I wonder what the end result of black box, neural network and other programed systems will be?

Graybox says

1 would expect this in small cap and penny stocks, but the currency market....lol I wonder what the end result of black box, neural network and other programed systems will be?

Events like pegging/de-pegging are especially hazardous to currency traders. At least for penny stocks you know the risks and can adjust your leverage accordingly.

IMO all trading systems should have some kind of dislocation "safety valves." All strategies have underlying assumptions. When they are broken, it is time to stop trading and enjoy a cup of tea.

Peter P says

Events like pegging/de-pegging are especially hazardous to currency traders. At least for penny stocks you know the risks and can adjust your leverage accordingly.

Risk fundamentals 101 it's a zero-sum game no matter what market you trade. Risk management can be applied to any system if not ignored. So many, 95%+ rely on the "whore of hope" to get them threw it... You know what whores do...lol

Peter P says

underlying assumptions

One of the underlying assumptions every system needs is the "Black Swan" can fly over anytime. Proper risk management will save your butt from a catastrophic event.

Graybox says

Risk fundamentals 101 it's a zero-sum game no matter what market you trade. Risk management can be applied to any system if not ignored. So many, 95%+ rely on the "whore of hope" to get them threw it... You know what whores do...lol

More like the "whore of rope" now. LOL!

Graybox says

One of the underlying assumptions every system needs is the "Black Swan" can fly over anytime. Proper risk management will save your butt from a catastrophic event.

It is quite hard to have proper risk management when the market makes a 2400% ATR move. Many strategies will have to be under-leveraged most of the times. We all know that OPM traders will rather take the tail-risks. :-)

Perhaps it pays to spend more time in defined-risk strategies like long-options or spreads.

Nowadays, so many people are selling options for "income" they are depressing price premiums.

Now since the Swiss are so secretive-I wonder if the central bank decision was communicated to some trader/hedge fund before that? That guy would have made a killing going short. If some one did it froma Russian account, nobody could even trace them.

lostand confused says

Now since the Swiss are so secretive-I wonder if the central bank decision was communicated to some trader/hedge fund before that? That guy would have made a killing going short.

Good for him.

Goldman Sachs Recommended 2015 Trade:

#6 – Sell the Swiss franc against the Swedish krona

A monetary policy divergence play.
http://blogs.wsj.com/moneybeat/2014/11/20/here-are-goldman-sachss-top-trades-for-2015/

Only a fool would take advice from a large player in a zero-sum game.

Peter P says

Only a fool would take advice from a large player in a zero-sum game.

Bingo a fool or a "muppet"

But muppets are so cute. :-)

Swiss Franc vs gold

Euro vs gold

Several currency trading firms across the world have gone belly up due to the Swiss bank move. Looks like there were stops slippage, due to the ferocity of the move and many accounts ended up with negative balances-interesting times.

Multiple of billions were lost yesterday... It will take time to digest and see the real cause and effect over time. CHF is still in the bottom range of yesterdays move, lots of head scratching going on.

This will have to be looked at collective over time to acquire a reasonable concept of cost benefit which the lines are being drawn from both sides..

FXCM will be interesting (halted). Could be 0.

mell says

FXCM will be interesting (halted). Could be 0.

Very interesting.

Numerous FX Brokers Shutter After Suffering "Significant Losses" Following SNB Stunner

http://www.zerohedge.com/news/2015-01-15/2-fx-brokers-suffer-significant-losses-after-snb-surprise-breach-regulatory-capital-

lostand confused says

Several currency trading firms across the world have gone belly up due to the Swiss bank move. Looks like there were stops slippage, due to the ferocity of the move and many accounts ended up with negative balances-interesting times.

Can they be negative? Many retail FX accounts are not setup as proper margin accounts. Not sure if they can go debit. At least, they may not be able to collect.

Brokers in the US are better regulated. Outside of this country, many are just modern day bucket shops.

lostand confused says

Looks like there were stops slippage, due to the ferocity of the move and many accounts ended up with negative balances-interesting times

Brokers also jump the tracks with hedging various currencies to be able to chase traders stops using trader money basically margining themselves with trader money.

This should give pause to the banking institutions who do the same thing with depositor funds. Lots of brokers claim to be ECN and no dealing desk but that is simply not true.

Not to mention they also setup subsidiaries less regulated brokers in other countries.

It's a rough neighborhood my friends....

Graybox says

mell says

FXCM will be interesting (halted). Could be 0.

Very interesting.

Numerous FX Brokers Shutter After Suffering "Significant Losses" Following SNB Stunner

http://www.zerohedge.com/news/2015-01-15/2-fx-brokers-suffer-significant-losses-after-snb-surprise-breach-regulatory-capital-

From the article, if seems most retail traders are caught short. This is so exciting. :-)

Idea: perhaps currency trading is an exercise of comparative religion? :-)

Peter P says

Idea: perhaps currency trading is an exercise of comparative religion? :-)

And can be applied to all markets big and small....

Graybox says

Peter P says

Idea: perhaps currency trading is an exercise of comparative religion? :-)

And can be applied to all markets big and small....

Yep, trading is really an analysis of beliefs.

Peter P says

Brokers in the US are better regulated. Outside of this country, many are just modern day bucket shops.

MF Global?!!!

smaulgld says

Peter P says

Brokers in the US are better regulated. Outside of this country, many are just modern day bucket shops.

MF Global?!!!

LOL, sometimes even regulations can help you so much.