EUR/CHF wipeout/margin call ... negative balance ... what to do?

[i960]

So while we all know the CHF made a pretty extreme move, does anyone else agree this could be yet another case of using leverage to squeeze juice from a stone and the inevitable steamroller coming around for a visit? It seems like every time there's some kind of opportunity where people can buy/sell 10-100x some unit of something in order to extract "free money" from it, this ends up happening.

I'd think anything under 4-5x leverage (to total account) would have left the account with at least some small amount of some money in it. Say 1 6S per 25k for example. I personally don't trade 10 FX contracts at a time, but the sad thing is I could see others doing it and with it requiring maybe 25k or so of margin (at the time), they might have felt that while the position is larger than normal, CHF is stable and unlikely anything bad would ever happen. Maybe one moral here is that if something seems too easy the trader might want to doubly question the potential negative outcomes.

 

[ExperiencedJoe]

So while we all know the CHF made a pretty extreme move, does anyone else agree this could be yet another case of using leverage to squeeze juice from a stone and the inevitable steamroller coming around for a visit? It seems like every time there's some kind of opportunity where people can buy/sell 10-100x some unit of something in order to extract "free money" from it, this ends up happening.

No I don't agree. No one is doing squeezing. What a ridiculous notion that someone is out there to get you. They don't know who you are. Why would they then come get you ?

 

[Johno1]

I trade futures/options for one main reason, leverage. Leverage is not the problem, leverage mismanaged is, by people being encouraged to gamble, and sucked into believing this game is really simple/ often blinded by greed. I put together strategies that create far greater leverage than that offered for Forex, what I don't do is leave myself exposed to catestrophic losses when unforseen events occure. Unforseen events occure with monotonous regularity, you always need to cover your arse.. For the ones that got caught, my commiserations, I've been there in the past.
Cheers John

 

[i960]

No I don't agree. No one is doing squeezing. What a ridiculous notion that someone is out there to get you. They don't know who you are. Why would they then come get you ?

It's called symbolism. You might have just failed the turing test.

 

[ExperiencedJoe]

It's called symbolism. You might have just failed the turing test.

Yes, I know symbols AAPL, FB, IBM, etc, etc. There's no evidence they go around squeezing or get people just because they use high leverage.

 

[i960]

Yes, I know symbols AAPL, FB, IBM, etc, etc. There's no evidence they go around squeezing or get people just because they use high leverage.

Are you seriously that dense?

 

[volpunter]

This is not what happened. There were plenty trades that were filled in the 1.05-0.95 range before the pair dipped down to 0.85 levels (eur/chf). Same in usdchf and other chf pairs. Just because your broker stopped quoting or froze your platform does not mean nobody else was prevented from trading. If you traded at a true ECN you would know that.

You get it didn't happen in 1 day, or 1 hour, or 1 min, it happened in 0.01seconds, your SL hit, went market order and your down 30,000pts or what ever it was, nothing you could do about it, SL can't help.

You understand even a moderate account say $1000 trading a $1 per pip on a CHF which is fine for 1K, was suddenly SL's out at -$30000 don't you ?? in 0.1 seconds right ??

It's an extreme circumstance.

 

[volpunter]

This has nothing to do with a "plan" but legal enforceability. If a client can show that the broker did not honor or fill a stop loss order at a "reasonable" level or froze the platform despite the fact that there was no internet outage anywhere, and/or that the broker delayed execution or intentionally filled the order at a much worse price then the client certainly has legal recourse. It may be hard to prove but it is possible. Keep in mind the broker also must prove that he could not have possibly filled the order better which in itself will be very very difficult and could take months.

But you arguing that clients that owe above and beyond their account balance should not be on the hook sounds very "privatizing gains, socializing losses" to me. I am happy this rule is in place, I do not want my broker to go under because other cowboys are not held accountable for their decisions.

To put my statement above in proper context, again the market did not move in "0.01seconds" by 30%. This is nonsense and if you need proof then I am happy to provide you with the tape of lmax and fxall and other professional ECNs. You may think this does not impact you as you have not traded on such ECNs but your broker certainly had access. If trades printed on ECNs and liquidity providers showed prices (which they did way above 0.95 levels (in eur/chf) then your broker cannot argue that your order could not be filled above those levels. And I am pretty sure that this will be the core defense any lawyer will be applying to defend anyone with negative account balances.

Did I say the OP shouldn't have to pay, can he afford to pay ? most likely not, this is going to force a lot of people to go bankrupt and lose everything, there house, there cars there savings, do you think that's right for a out of control circumstance in 0.01 seconds.

That's why I HOPE they come up with a sensible plan and so would you if you suddenly owed them 30K, it's in there interest as there unlikely to see 95% of the negatives anyway.

Sue the markets for being stupid enough to be able to move that kinda distance instantly, markets shouldn't work this way it's madness, happy to profit from but madness totally.

 

[volpunter]

you sound very much you have a beef in all this. And could you please provide a link to the "trader who lost 2.9 billion"? We are very curious learning about this poor chap.

And by the way, you would not be in any debt if you did not short CHF. Anyone who was short CHF should accept any possible consequences which includes a negative account balance and should own up to it.

Sorry but your an idiot/sociopath aren't you, not the first time you've been in my face pushing for a fight.

They didn't just lose there account, say 1K of play money, there position put them maybe 20K into debt, although it "Can" happen and it's part of the risks, this has only happened once in all the years I've been trading Forex.

Yes there accounts are Zero that's a given, they've lost there trading money, but being put to -20K, show some consideration man!

1 big old trader with a huge fund, reportedly lost his account being 2.9BILLION!!

They didn't over trade, they got very very very unlucky!

Happy I don't trade CHF, but if I'd of opened a short for a quick scalp, I could be 200K in debt in 0.1seconds, game over man game over, fair ??

 

[volpunter]

absolutely best post on anything regarding this debacle. Bravo!!!

I trade futures/options for one main reason, leverage. Leverage is not the problem, leverage mismanaged is, by people being encouraged to gamble, and sucked into believing this game is really simple/ often blinded by greed. I put together strategies that create far greater leverage than that offered for Forex, what I don't do is leave myself exposed to catestrophic losses when unforseen events occure. Unforseen events occure with monotonous regularity, you always need to cover your arse.. For the ones that got caught, my commiserations, I've been there in the past.
Cheers John