CHF mess

[ExperiencedJoe]

The 4% range is also the reason why I told that the risc/reward ratio was not good. The huge losses confirm this. Even with a high leverage the potential profit was much smaller than the losses that occured.

The risk is irrelevant. They can pull exactly the same stunt in any other market at any time. The only reason why they don't do it more often is there's not enough profit in it. An operation like that take considerable work and no doubt costs some money to grease some gears at some vital locations.

To say people lost in CHF due to low risk reward is ludicrous. They lost because it was a set up. If this kind of set up isn't dismantled for good, it will be back again in a few years, and everyone would have forgotten it happened before.

The problem isn't about risk, reward, or leverage. It's about the banks jamming unlimited loss down people's throats, while bolting all the doors shut.

 

[Turveyd]

There were 2 groups of people who traded the CHF since 2012:

1. people who have no clue about trading. The highest high for the last 3 years was 1.25 and the lowest low was 1.2. So the potential profit was limited to about 4%! Real traders need more volatility.
2. people who knew something that others did not know (insider trading). Those who were long knew that this would happen. You never take a position in a market where the max range is 4%. Especially not if you see now what the risc was.

The 4% range is also the reason why I told that the risc/reward ratio was not good. The huge losses confirm this. Even with a high leverage the potential profit was much smaller than the losses that occured.

Until they pulled the 1.2000 protection, there was ZERO risk, get in at this level, 20SL and hey presto guaranteed eventual profit, ofcourse they pulled it and made up for all the guaranteed profit of 3 years in 1second.

If I was even aware of Pegging, CHF, I'd of been on the short side before major news, cause that's the reward side obviously, holding news which could include pulling 1.2000 protection is kinda silly to me I'll admit.

But there are enough, some big boys wiped out, to say it wasn't that obvious.

2 FXCM accounts, $1000 each, 1 long, 1 short, figure if the news went the other way the long would make back the shorts loss and if the news went the way it did, FXCM have Negative account protection, lose $1000 there, gain $10000 on the other, easy peasy!!

 

[i am nobody]

The risk is irrelevant. They can pull exactly the same stunt in any other market at any time. The only reason why they don't do it more often is there's not enough profit in it. An operation like that take considerable work and no doubt costs some money to grease some gears at some vital locations.

To say people lost in CHF due to low risk reward is ludicrous. They lost because it was a set up. If this kind of set up isn't dismantled for good, it will be back again in a few years, and everyone would have forgotten it happened before.

The problem isn't about risk, reward, or leverage. It's about the banks jamming unlimited loss down people's throats, while bolting all the doors shut.

I included a 1 minute chart from dukascopy. As you can see there were quotes every minute and there was volume too. So all doors were NOT shut. If there is fire in the house everybody wants to run out through the door, but often this is impossible if there are to many people who want to do this at the same moment. That's what happened. Even in quite markets it can happen that your order will not get filled if you put a fixed buy or sell price in the market. All orders follow strict rules, so it is not because you want to get out at 1.15 that you will get out at that price. All orders that are legally before you will be executed first.

It is a problem about risk/reward because your profit was limited to 4% (by the market, not by intervention of SNB) and the losses were unlimited (because SNB intervened and could stop doing that at any time, which they did). You should always take all risks in consideration. So the potential profits compared to the potential losses gave a very bad ratio.

 

[ExperiencedJoe]

View attachment 148678

I included a 1 minute chart from dukascopy. As you can see there were quotes every minute and there was volume too. So all doors were NOT shut. If there is fire in the house everybody wants to run out through the door, but often this is impossible if there are to many people who want to do this at the same moment. That's what happened. Even in quite markets it can happen that your order will not get filled if you put a fixed buy or sell price in the market. All orders follow strict rules, so it is not because you want to get out at 1.15 that you will get out at that price. All orders that are legally before you will be executed first.

It is a problem about risk/reward because your profit was limited to 4% (by the market, not by intervention of SNB) and the losses were unlimited (because SNB intervened and could stop doing that at any time, which they did). You should always take all risks in consideration. So the potential profits compared to the potential losses gave a very bad ratio.

If dukascopy allowed everyone out at their stops, then the risk reward remained irrelevant. People's risk management would have saved them from a wipe out. The decision to take any given risk reward is perfectly fine until proven wrong. I don't see too much value in assigning the trading failure to risk reward from hindsight. At other occasions, the exactly same risks taken could just as well have worked.

So, are you saying everyone at dukascopy were saved by their stops and that nobody's account had gone negative ? The apparent continued availability of the market at dukascopy seems to imply that to me.

 

[benwm]

So, are you saying everyone at dukascopy were saved by their stops and that nobody's account had gone negative ? The apparent continued availability of the market at dukascopy seems to imply that to me.

I think I read somewhere that Dukascopy was wiping out any negative balances, in any event. Same is true for Oanda. You can use that information to decide where you trade forex in future. In 1987 crash, many brokers refused to pick up the phone when sell orders were flooding in. During the 2008 financial crisis when the exchanges started banning short selling, my stockbroker said they were not taking limit orders...I could only place market orders for a period of time! So for some firms, if they are positioned the wrong way during extreme events they will do anything to avoid taking on more risk. I don't think that will ever change.

 

[i am nobody]

So, are you saying everyone at dukascopy were saved by their stops and that nobody's account had gone negative ? The apparent continued availability of the market at dukascopy seems to imply that to me.

 

[i am nobody]

You are not an idiot, that would be still a compliment for you. You put words in other peoples mouth that they never said. Show me where i wrote that everybody could get out. I wrote the opposite:" If there is fire in the house everybody wants to run out through the door, but often this is impossible if there are to many people who want to do this at the same moment. That's what happened." Doors were not closed but they were too small to let escape everybody. I know you will still not understand this but at least others will.

It was also not risk reward from hindsight, because since 2012 the range was smaller than 4%. Such a narrow range is deteriorating the risk/reward ratio. The risk is the same but the reward is limited to 4%. I prefer a reward that can go to 5-10% with the same risk as those who went short CHF. Because the reward would be much bigger it would change the outcome of risk divided by the reward. Too difficult for you to understand probably.

 

[ExperiencedJoe]

I think I read somewhere that Dukascopy was wiping out any negative balances, in any event. Same is true for Oanda. You can use that information to decide where you trade forex in future. In 1987 crash, many brokers refused to pick up the phone when sell orders were flooding in. During the 2008 financial crisis when the exchanges started banning short selling, my stockbroker said they were not taking limit orders...I could only place market orders for a period of time! So for some firms, if they are positioned the wrong way during extreme events they will do anything to avoid taking on more risk. I don't think that will ever change.

Shops that take the other side of retail can easily forgive part of the retail loss because they are happy to settle for a smaller profit that is nevertheless very substantial. It saves them spending money on lawyers to chase the debt that would be difficult if not impossible to recover. As you can reasonably imagine, retail would have gone all in with their money. So there's nothing left beyond what was in their accounts. To chase them for the negative balance would be akin to extracting blood from a stone - not very productive or profitable.

Shops that didn't take the other side of retail would be responsible for all retail losses that are beyond the retail accounts. The money will be owed to a third party liquidity provider. For these shops, they have no option but to recover every single penny of the negative balance or they face losses that is not their own doing.

We can work out what kind of shop it is, whether they take the other side of retail or not, by simply looking at how aggressively they pursue the negative balances. For some shops, there is no option but to be aggressive. So people hoping all shops will forgive negative balances is living in a dream world.

Are they really being generous when a shop say they will forgive negative balances ? What are they saying exactly ? They are saying: we will take all your money in your account (which is a considerable sum and for some people it's all they have got), and won't ask you for more. The key point here is they are taking all your money. Does that still sound like a good deal ?

 

[ExperiencedJoe]

You are not an idiot, that would be still a compliment for you. You put words in other peoples mouth that they never said. Show me where i wrote that everybody could get out. I wrote the opposite:" If there is fire in the house everybody wants to run out through the door, but often this is impossible if there are to many people who want to do this at the same moment. That's what happened." Doors were not closed but they were too small to let escape everybody. I know you will still not understand this but at least others will.

It was also not risk reward from hindsight, because since 2012 the range was smaller than 4%. Such a narrow range is deteriorating the risk/reward ratio. The risk is the same but the reward is limited to 4%. I prefer a reward that can go to 5-10% with the same risk as those who went short CHF. Because the reward would be much bigger it would change the outcome of risk divided by the reward. Too difficult for you to understand probably.

If I am not an idiot, then I wonder if you are one ? You are telling me everyone was trying to get out, yet the volume is showing few if anyone is getting out. How come, what was the hold up, and who was holding it up ? Your chart proves that people where not allowed out.

The claim that the market was open, while we could actually see nobody was permitted to trade, is simply BS. The market was only open in name, but closed in every other respect. In this kind of environment, risk management, risk-reward, and everything else are completely irrelevant.

 

[Ghost_of_Blotto]

If I am not an idiot, then I wonder if you are one ? You are telling me everyone was trying to get out, yet the volume is showing few if anyone is getting out. How come, what was the hold up, and who was holding it up ? Your chart proves that people where not allowed out.

The claim that the market was open, while we could actually see nobody was permitted to trade, is simply BS. The market was only open in name, but closed in every other respect. In this kind of environment, risk management, risk-reward, and everything else are completely irrelevant.

Agree 100%. Which is why one should not trade in markets where they are prone to change the rules in the middle of the game. Or markets with price limits. Or short physically settled contracts that one is unlikely to be able to deliver. The danger is of course that there is more and more intervention and no product or asset class is immune.

Of course the strong will bend the rules to take the chips from the weak. A few years ago a bank systematically sold off the entire German bond complex with the intent to bust out independent traders who were competing with them in exchange listed bond futures which were matched with a pro-rata algorithm. The bank was fined but the busted locals weren't made whole. So objective achieved for the bank. Competition eliminated. Don't agree with it but might as well piss into the wind for all the good complaining is going to do.