It’s an absolute bloodbath in the FX markets. The tide’s gone out and it’s now very apparent who has good risk management systems in place and who was reckless safeguarding your deposits.
Is your broker on this list?
- Alpari – bankrupt!
- FXCM – took an enormous $225,000,000 loss on clients with negative balances. It’s desperately seeking a bailout.
- EXCEL Markets – bankrupt!
FX brokers are led to the slaughterhouse.
One of first articles that I send traders on the free EAs list is how to protect yourself from a forex broker bankruptcy. It’s absolutely, critically important where you decide to trade.
I trade at Peppertsone and I strongly recommend that you trade at Pepperstone, too. They made it through this crisis unscathed. They’re well regulated. They’re in a safe and stable banking jurisdiction. And… they’re still running a thriving business.
PS: QB Pro made it through the CHF chaos unscathed. We closed out with a nice profit yesterday.
Hi, was just checking the basic (free) version of you Scalper for Ninja trader.. what would have happened to it on USD.CHF or EUR.CHF on this day ? Do you also have a version which has a tick based final stop loss against this type of black swans..
Hi Deniz,
No stop loss is going to help you in that situation. The market instantly gapped 10%. There was essentially no liquidity in the market for about 3 hours.
Also, a black swan is technically an unknown risk. Everyone knew or should have known that a peg is artificial and will eventually be withdrawn.
Hi Shaun,
Many thanks for your response. We are actually still debating the events of Thursday in house, and normally I use a soft stop loss based on multiple factors which really would prove disastrous in this situation. However I’m still wondering what would happen to someone say who went long at 1.18 (EUR.CHF) and had a reasonable stop loss at 100 ticks or so, so you get filled not exactly at the moment of the announcement but after the first 30 seconds or so, as the drop did not happen in a flash but over the course of 15 minutes till EUR.CHF hit .86’s…
Also I would argue it is definitely a black swan, as the SNB promised just a month ago that at least till 2016 they were not going to touch the EURO peg, so essentially they shamelessly lied to the entire world, which was a very unethical move for a central bank who would have still done very well if they had let on this news with gradual or at least honest warnings.
Hi Deniz,
It really depends on the broker. Some might have logic in place where they view that the trade’s stop loss is hit before execution and thus throw out the order. Another less robust broker would blindly follow the instructions, then try to close the trade immediately. That type of scenario is up the broker’s programmed discretion.
–Shaun
Hi Shaun,
In light of this past week’s events, I was just wondering if the brokers you recommend have negative balance protection? And I do like your thoughts on not having such a big account but instead moving profits out in order to protect them. You can’t really count on a stop loss with such a drastic move. I feel bad for those who had such a tough loss this week.
Hey Mike,
None of the brokers I recommend offer negative balance protection. If you do business overseas, a negative balance doesn’t mean much anyway. Is an Australian broker going to sue my Irish company over a $20,000 loss? They’d have 0% chance of ever collecting. So in the real world, it’s the same thing.
Also, several brokerages this weekend decided to forgive negative balances. It’s a smart PR move in my opinion because they’re never going to collect the money, anyway. You may as well turn lemons into lemonade.
–Shaun