volpunter thanks for your posts. I am totally freaked out by this event-looking over my code and cash limits per fx cross. I am even considering moving to "safer" tickers such as ETF's ..but now I am worried that I am overreacting.The past year as I build up my algo code , I have been so cavalier about not looking at fundamentals -stupid and naive enough to think that the tape tells the tale. (What an ass)! I was. Now I am trying to get my hands on stuff so that I can be in a better position to know what pairs to avoid at all if there structural things (ie pegs) can cause black swans on them. If you have any suggestions on what to avoid, I'd appreciate a heads up so I can drill down further on the fundamentals of such.
Did Interactive Active Brokers Honor CHF Stops Thursday ?
- Thread starter jaygould
- Start date
Maybe you should read Taleb's book again I feel you missed the key points: A black swan even has nothing to do with an "unimaginable event" but an event that statistically occurs extremely rarely but to which people attach an even smaller probability of happening. That is precisely why Taleb keeps on buying deep out-of-the money options. The market under-prices those regularly. Nothing to be seen here, move along folks...
That is essentially what every hft firm is doing. They frequently "black list" securities that exhibit "tail risk", and when I say frequently I mean sometimes several times per day. I am very prudent in maintaining and constantly updating my electronic econ calender and event risk filter in order to minimize binary risk.
Of course the tape tells the tale! That was true 100 years ago, this is still true today!
Since November '14, EURCHF was attacked every week, just look at the graph from October to December. You should have notice that it became more and more dangerous to be short CHF.
And the tape doesn't tell the tape?
To answer your question : you must avoid being long near a weak support (aka tested several times (here 1.20) ) and being short near a weak resistance.
Chris Mac
Chris Mac. Thanks for your insights and want to clarify 1 thing though. IF a spot is tested mult times and it continually bouced off of it, would'nt that be a strong support. (assuming a normally free trading ticker not w/ a peg) IOW if this chart was a reg stock w no peg, would you consider it strong support for it has been tested mult times and passed test? Thanks again.
Mush
This is really a good question.
A strong support for me in a world without Peg?
Horizontal, rounded number, tested 2 times, max 3 times, kiss kiss and good bye (V bottoms).
You got generally one extreme price, and 1, 2 attempts to reach this extreme price (without success). To resume, a strong support doesn't seem easily "reachable". Prices close to 1% are rare.
For example : Yen vs USD.
Being short USD vs Yen was a great trade from 2007 until 2011.
In 2012, I don't want to be long anymore Yen vs USD when USDJPY is close to 75.
Why ?
Because every time (white circles), all the world is shorting the Yen, and 75 seems to be out of reach.
It doesn't mean that the support cannot break, but reward is limited compared to the risk.
You must take your profits and wait if support holds or not. If not, you can jump again in the trade.
Hope it helps.
Chris Mac
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The only thing to be seen here is your misunderstanding of his central point. Once you get that then you should move along. No one believed that a Black Swan existed. Given how many white ones they had seen (and zero black ones) the black was unimaginable; it was widely believed to be nonexistent. True Black Swan events are, as you point out, mispriced ... but the key to why the pricing is such is that almost no one believes they will ever happen.
The numbers are important but understanding the concepts behind the numbers is important as well.
I think what MushinSeeker wants to know maybe is how to rate the probability of Black Swan events occurring for various markets.
For example how would some one have rated the Swiss franc euro peg collapsing as more probable then say the yuan dollar peg or any other peg ?
So does any one have an opinion on the next most likely peg to collapse, yuan dollar peg, Danish peg etc ? And if so why.
For example how would some one have rated the Swiss franc euro peg collapsing as more probable then say the yuan dollar peg or any other peg ?
So does any one have an opinion on the next most likely peg to collapse, yuan dollar peg, Danish peg etc ? And if so why.
luisHK - The audit trail can be a little confusing, the field you have to search for to determine if IB capped one of your orders is 6591, that field shows the price IB modified your order to, presumably without your consent.
If it caused you to legitimately miss a fill, you should absolutely seek a price adjustment.
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