Found that dude trading CL with an IB account

schizo said:
I can already smell the scent of massive class action lawsuit. How could a broker so large as IB have screwed up so colossally? :rolleyes:

BTW if my broker gave me an incorrect quote, then any loss I incur is not my responsibility.
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It was clearly IB's fault because the software stopped working at -ve price. If there were a class action lawsuit, IB will likely lose.
 
Risk management can't protect against that -ve oil price episode.

Even a small position can balloon to large losses if you buy at $0.20 and the price went down to -$37.

Counter-trend trading is a legitimate strategy with edge. Many successful traders use counter-trend trading strategy. It's reasonable that some of these experienced counter-trend traders buy oil on that fateful day, and blow up their account.

I expect many oil veteran traders to be completely surprised by negative oil prices too.

maxinger said:
https://www.zerohedge.com/energy/one-trader-started-day-77000-his-account-end-he-owed-9-million

good article.
We can blame IB for their lousy system. But then,
obviously those who lose millions of dollars are newbie / poorly disciplined traders

sorry I find very hard to find pity / sympathy for such people like Shah.

why?

- if your money management says you can trade max 5 lots, you cannot trade more than that no matter how cheap oil price is

- price has been going down. there was totally and absolutely no U turn sign / reversal pattern to indicate price was going to reverse to go up. why go and long?
his trade plan is faulty.



this reminded me of myself years ago.
price went down. I went to buy thinking it was very cheap.
price went down some more. I went to buy more thinking it was very cheap.
price went down some more. I went to buy more thinking it was very cheap.
price went down some more. I went to buy more thinking it was very cheap.
price went down some more. I went to buy more thinking it was very cheap.
price went down some more. I went to buy more thinking it was very cheap.

finally account had nothing in there and I had to top it up.
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IB is 99% responsible for the guy's losses (the one who bought 212 cars at 0.01), WTI had already gone negative but their crappy platform was still displaying bid/ask at 0.00/0.01. This shouldnt have happened, the trades at 0.01 shouldnt have even gone thru, IB is not a bucket shop so who were these guys buying these 1 penny contracts from anyway?

IB has insanely high margin requirements for everything because they dont have any confidence in their own risk management system, funny thing is those insanely high margins didnt stop them from losing money in the end.

This will likely happen again at some pt, its just a very poorly run firm.
 
Primal Trader said:
Usually in unprecedented situations in life, the learning curve is pretty steep for most individuals and groups. Little experience and context to draw upon, even for professionals. Some get annihilated. Extreme examples of risk management on the fly are 9/11 and the hospital meltdowns in parts of Europe with Covid 19.

With what happened in oil, I too was watching what was happening via Sierra charts and my price froze at one cent. I was not in a position, but knew there had to be some major chaos going on.

Hopefully everybody involved, from the CME, FCMs, brokers to traders learned some really important lessons about risk management, which is at the heart of trading, and paying sufficient attention to details! It is just a wonder it did not turn out even worse than it did. Good for IB for trying to straighten things out.
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This is not a risk management issue, its a technology issue, IB was incapable of displaying negative prices.
 
If the trader had been "hedged" in a three part CL butterfly, or a four part CL condor, could he have mitigated (or avoided) total capital destruction? 77K is a lot of money for a retail trader to lose.

Yeah, he might be relieved that he doesn't owe 9 million dollars, but 77K is still a tough punch to the gut. It will take time to save that much to trade again, if he decides to get back on that bucking horse.
 
helpme_please said:
Risk management can't protect against that -ve oil price episode.

Even a small position can balloon to large losses if you buy at $0.20 and the price went down to -$37.

Counter-trend trading is a legitimate strategy with edge. Many successful traders use counter-trend trading strategy. It's reasonable that some of these experienced counter-trend traders buy oil on that fateful day, and blow up their account.

I expect many oil veteran traders to be completely surprised by negative oil prices too.
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I prefer to use the word reversal in this statement
'Counter-trend trading is a legitimate strategy with edge' .

so Reversal is a legitimate strategy with edge.

When Shah was buying the oil contract , he was obviously doing counter trend trading (aka catching falling knife or kamikazae trading).

Few minutes after the knife has fallen on the floor / after his deadly kamikaze trading, there was reversal signal / pattern.

And that was when he could have bought the oil contract.
Obviously he couldn't because IB system / chart wouldn't show what was below the zero line.

If Shah continues the way he is doing, he will be in very very deep trouble next time. Next time IB might not safe him.
 
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BAT31 said:
If the trader had been "hedged" in a three part CL butterfly, or a four part CL condor, could he have mitigated (or avoided) total capital destruction? 77K is a lot of money for a retail trader to lose.

Yeah, he might be relieved that he doesn't owe 9 million dollars, but 77K is still a tough punch to the gut. It will take time to save that much to trade again, if he decides to get back on that bucking horse.
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two contracts going negative is enough to wipe him any ways


77k is not a lot or a little it depends on the person risk level and their income and wealth and belief in the profession of trading/investing in general there is no such thing as a lot or a little

i know people worth million and the most their trading account has is 100k and i know others worth negative, loans, credit cards, etc etc and yet they got wurter million in their trading account
 
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