Red alert, stop trading

[globalarbtrader]

Someone would be that over-leveraged that this type of fail-safe would be necessary?? If so, I recommend reexamining use of margin as your pre-trade safety valve.

Anyone who runs an automated system without the ability to shut it down quickly is extremely irresponsible. S*** happens basically.

These guys weren't over leveraged:
https://www.bloomberg.com/news/arti...t-shows-how-to-lose-440-million-in-30-minutes

GAT

 

[Buy1Sell2]

Imagine:

1. You buy IBM at $100
2. You enter a stop limit at $95
3. It opens at $90..$88..$85
4. Your stop may not fill (after all, you set a limit)

And then imagine this happens in everything you're trading x 25.

I see a fail safe as something let you trade again tomorrow in the event that you were drastically wrong in your expectations on how your algo performed. Not necessarily margin/leverage related.

Above situation is completely unrelated, just thought I'd give an example.

What allows you to trade the next day is to have it open at 90 and go to 88 and 85 and no stop fill and your toes are still tapping.

 

[Buy1Sell2]

Anyone who runs an automated system without the ability to shut it down quickly is extremely irresponsible. S*** happens basically.

These guys weren't over leveraged:
https://www.bloomberg.com/news/arti...t-shows-how-to-lose-440-million-in-30-minutes

GAT

What was their account size or market cap?

 

[nooby_mcnoob]

What allows you to trade the next day is to have it open at 90 and go to 88 and 85 and no stop fill and your toes are still tapping.

 

[nooby_mcnoob]

Aside: are we really having an argument in this thread against a fail safe strategy? That's kind of hilarious to me haha.

 

[Buy1Sell2]

View attachment 183009

Correct. That is why a move of 15 percent in an instrument should not equate to 15% of Total LIquid Net Worth. Anyone trading and having to worry about getting out of all positions at once is wildly overextended.

 

[Buy1Sell2]

Aside: are we really having an argument in this thread against a fail safe strategy? That's kind of hilarious to me haha.

Certainly you would need one if Prudent Risk Management has not been employed. However, a person should never get themselves into a position where one would be needed.

 

[nooby_mcnoob]

Certainly you would need one if Prudent Risk Management has not been employed. However, a person should never get themselves into a position where one would be needed.

I worked at a successful hedge fund and they literally had a stop all trading button.

So... I disagree.

 

[Buy1Sell2]

What was their account size or market cap?

I see it was 296 million. Thus, they placed more than their entire market cap up for grabs in a situation where their technology was not up to snuff. Very careless and qualifies as being wildly overextended in the arena of market making. This was totally their fault and they were destined to fail at some point.

 

[nooby_mcnoob]

@globalarbtrader

you worked in the industry right? Did your employers employ any fail safe strategies?