Managing risk of broker platform outage

[qlai]

for those who are really good and do not need to transfer risk to others,

I think risk transfer is what the best ones do. Taking excessive risks with own money is gambling, taking excessive risks with OPM is trading Didn't mean to take this thread off course, but I can't think of any better solution to the problem. It's not very practical to fund two accounts for the purpose of redundancy, for most people.

 

[ETJ]

Product dependent, but ask your broker if they offer/allow access to redundancy. Ask them now, before you need it.

 

[nooby_mcnoob]

B. Be hedged all the time.

In this sense, a stop limit is not enough. I read (never done it) that you should have two OCO stops: your limit stop and "holy shit the world is ending" market stop. But in that case, you should probably be buying anyway.

Don't risk more than X% of your portfolio on any one trade. Where X <= 5?

 

[Robert Morse]

I don't know how a backup account can help since the same broker whose platform is down has to be used to close the existing open order.

EDIT: Ahh ... I see how another broker helps. One can place a hedging order with the other broker to eliminate the risk of the open order placed on the lousy broker platform which broke down.

Different FCM, Different software.

 

[tomorton]

The issue for 99% of traders 99% of the time isn't broker platform shut-down, its high leverage scalping that should be the worry.

There's no point upgrading to Business if the plane's going to crash.

 

[Jason11111111]

I use 2 brokers.
A for holding index and etf.
B for day trade.

There's no problem even if the broker A broke down for a month.
Use A to create opposite position of B when B break down.
Problem is the trade in B might be close out due to margin call. And I have no idea where is the margin call point. And when I should close out the hedge trade in A.

 

[BlueWaterSailor]

Don't risk more than X% of your portfolio on any one trade. Where X <= 5?

It's one of a set of risk decisions that should be made well ahead of time and re-evaluated on a regular basis - say, quarterly. These are often based on risk of ruin calculations as well as personal risk tolerance. Generally, you want to define the maximum percentage you're willing to risk 1) per stop, 2) per trade, 3) have exposed at any one time (BPR.) 1%/5%/50% is a reasonable starting point.