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What were some warning signs for the 2015 Swiss Franc disastrous event?
- Thread starter helpme_please
- Start date
Its very easy to predict that holding a long position in an enduring and consistent downtrend is a probable poor strategy. No traders should have been long EUR/CHF when the SNB ended its buy EUR policy. The downtrend had become visible months earlier.
I think most traders in the 2015 EUR/CHF entered not because how it looks on the chart, what trend it is in. The price fluctuation was so little that it is not worth the risk to trade the price movement. The most logical reason to be in EUR/CHF is the positive carry trade. Juice the positive carry interest income with leverage with the seemingly low risk of losing due to price fluctuation because SNB will be there to defend the peg.
I think most traders in the 2015 EUR/CHF entered not because how it looks on the chart, what trend it is in. The price fluctuation was so little that it is not worth the risk to trade the price movement. The most logical reason to be in EUR/CHF is the positive carry trade. Juice the positive carry interest income with leverage with the seemingly low risk of losing due to price fluctuation because SNB will be there to defend the peg.
How many traders actually trade eurchf pair, dear ? probably, one or two in 1,000 traders so I won't care much about it...having said that, textbook stuff like cost of carry thing won't really work in real markets.
How many traders actually trade eurchf pair, dear ? probably, one or two in 1,000 traders so I won't care much about it...having said that, textbook stuff like cost of carry thing won't really work in real markets.
It didn't make sense to trade the price fluctuation in EURCHF in 2015. The only logical explanation to be in this trade is the positive carry trade. Can't think of anything else. Whether it works in real markets or not is not the issue.
Anyone know the answer to my question, am I correct???
based on what I saw in the futures market, a stop loss would have been triggered with some minor slippage assuming you were not trading 1000+ contracts.
Has anyone else looked at that aspect? Futures were open and moving (EXTREMELY FAST), but a stop appears would have been triggered if entered.
based on what I saw in the futures market, a stop loss would have been triggered with some minor slippage assuming you were not trading 1000+ contracts.
Has anyone else looked at that aspect? Futures were open and moving (EXTREMELY FAST), but a stop appears would have been triggered if entered.
I wonder why the lack of warning from SNB. Usually, central banks drop hints so that traders can do the work for them without the central bank spending too much of their own money. Did SNB make a lot of money from this black swan event which is created by them?
Correction: Central banks NEVER drop hints. That's the whole point of their intervention or policy. If they dropped hints before and everybody adjusted for what they were about to do then their intervention or policy would lose effect.
based on what I saw in the futures market, a stop loss would have been triggered with some minor slippage assuming you were not trading 1000+ contracts.
Has anyone else looked at that aspect? Futures were open and moving (EXTREMELY FAST), but a stop appears would have been triggered if entered.
No on that day, stop-losses had 1000+ pips slippages because the entire forex market was shut down. All of the forex brokerages stopped providing quotes for several hours. There was NO QUOTES, NO PRICES!!! How can your stop-losses be filled when nobody was trading.
Spot Forex is an OTC market; there is no central exchanges. It's made up of about 10 - 20 banks and brokerages. If they stop trading, the whole market collapses.
based on what I saw in the futures market, a stop loss would have been triggered with some minor slippage assuming you were not trading 1000+ contracts.
Has anyone else looked at that aspect? Futures were open and moving (EXTREMELY FAST), but a stop appears would have been triggered if entered.
???
I was long RF, the eurchf futures on globex. No bid whatsoever to exit. RF had little volume on a normal day anyway. What futures are you talking about ?
From memory it took a long while until futures were active again at prices nearing the spot forex, had to neutralize the position via eur.chf spot which took a while as well as TWS wouldn't let the orders through despite showing quotes on both sides.
I didn't use a stop, so don't know how it would have worked, but with bids disappearing real fast it might have been ugly or disregarded by the system.
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I think most traders in the 2015 EUR/CHF entered not because how it looks on the chart, what trend it is in. The price fluctuation was so little that it is not worth the risk to trade the price movement. The most logical reason to be in EUR/CHF is the positive carry trade. Juice the positive carry interest income with leverage with the seemingly low risk of losing due to price fluctuation because SNB will be there to defend the peg.
I have to guess you're probably right, carry trade returns are something I never consider and would never take a position on that basis - it just seems to me like letting the tail wag the dog, taking on an inverse r:r when you're not forced to.
There was plenty of warning based of the "no-free-money-for-retail-forex-traders" principal.
The trade was go long at or just above the peg (1.20), hold until it bounced up 30 to 50 pips and then sell. Wait until it approaches the peg again and buy... rinse, repeat, all at 25:1 leverage or better. At the time, it seemed all retail fx was in the trade. If you had looked at the Oanda (which is 90% retail) aggregate position graph it was 90%+ long. If you looked at the aggregate order graph you saw that all the stops were set at 1.19 and change. All of them!
It is never a good idea to be on the same side as the overwhelming majority of retail fx traders.
I think it printed 0.88 or thereabouts by the next day -- a greater than 30 sigma move based on then current IV. When a move like that happens the market disappears, stops were filled in the 0.90's, customers went debit, and large retail firms like Saxo and Dukascopy nearly went under and ended up "socializing" the uncollectable debits (shortchanged the few of their customers who were short).
Large central banks typically signal their intentions in advance. Smaller ones not so much.
The trade was go long at or just above the peg (1.20), hold until it bounced up 30 to 50 pips and then sell. Wait until it approaches the peg again and buy... rinse, repeat, all at 25:1 leverage or better. At the time, it seemed all retail fx was in the trade. If you had looked at the Oanda (which is 90% retail) aggregate position graph it was 90%+ long. If you looked at the aggregate order graph you saw that all the stops were set at 1.19 and change. All of them!
It is never a good idea to be on the same side as the overwhelming majority of retail fx traders.
I think it printed 0.88 or thereabouts by the next day -- a greater than 30 sigma move based on then current IV. When a move like that happens the market disappears, stops were filled in the 0.90's, customers went debit, and large retail firms like Saxo and Dukascopy nearly went under and ended up "socializing" the uncollectable debits (shortchanged the few of their customers who were short).
Large central banks typically signal their intentions in advance. Smaller ones not so much.