Are you ready to meet the black swan?

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"A black swan is ahard-to-predict and rare event that has significant consequences."

Here is an example of one of the black swans that flew to the Swiss franc on 15 January 2015:

The consequences were quite devastating.

You can actually see for yourself.

Here are some numbers on this swan:

  • USDCHF price fell from 1.02275 to 0.65550 in 16 minutes ~ about 36%
  • spread during the fall reached 15178 pips (instead of the standard 12), which amounted to about 22.5% of the Bid price at that moment.

Trading during the Black Swan is suicidal because of the rabid spread.

Even if you have positions open in the right direction, there is no guarantee that you will not get a margin call because of the spread.

When the next black swan arrives - this is the question one wants to know the answer to, but alas...

But I have a feeling: in the next year or two a huge swan will fly in - and it won't be easy...

It is clear that the best way to survive a black swan is not to trade when it arrives.

And of course, there is another big risk: will your broker withstand such amount of margin calls with negative balance?

Even if you were fabulously lucky: you had an order open in the right direction and without a takeprofit, you had no limit orders, you were not eaten by a margin call and you managed to close the trade in time...
Then the question remains whether your broker will be able to pay back your hard-earned money.

Forewarned is forearmed!

What are your thoughts on black swan protection techniques in EAs? And is it realistic to catch the wave?

 

Good morning!)


It's a spooky picture...)

 
Alexander Ivanov:

Good morning!)


It's a spooky picture...))

Morning! ( True, I still have the evening.)
The most frustrating thing is that an honest broker, who actually places orders on the exchange, will suffer, while for the kitchen it's manna from heaven.
 
Nikolai Semko:

It is impossible to be prepared for this.
Not even the big funds, which have top-notch analysts on their payroll, were prepared. Not to mention us private traders. Many people got burned, everyone who was in the market at the time.
No stops were working at the time. No other defense mechanisms worked either. It was a financial tsunami. There is no protection from tsunami, as we know.

P.S. By the way, I remember there was a big scandal or even a court case about the "successful" withdrawal of funds before the event by the wife of either the prime minister of Switzerland or the banker in charge, in general who "unexpectedly" announced this forced change of course. Lazy to google how the showdown ended there.

 
Nikolai Semko:

"Black Swan-

I've got a knife with me, you can't take me that easily!


 
Andrei Fandeev:

It is impossible to be prepared for.
Not even the large funds, which have top-notch analysts on their payroll, were prepared for it. Not to mention us private traders. Many people got burned, everyone who was in the market at the time.
No stops were working at the time. No other defense mechanisms worked either. It was a financial tsunami. There is no protection from tsunami, as we know.

P.S. By the way, I remember there was a big scandal or even a court case about the "successful" withdrawal of funds before the event by the wife of either the prime minister of Switzerland or the banker in charge, in general who "unexpectedly" announced this forced change of course. Lazy to google how the showdown ended there.

That's true, of course... Still, some preventative measures can be taken to reduce the risk of running into a black swan.

For example, this is the first thing that comes to mind:

  1. It is advisable to use impulse strategies in EAs, i.e. which do not sit out profits, but act according to the principle: "Grab- run-wait" and "Better a small pie in the mouth than a big **y in the **poo". If such a strategy is not in the market 70% of the time, then there is 70% less chance of hitting a PE.
  2. Use a powerful spread expansion control in EAs, thus recognizing the tsunami at which the EA should freeze (block) itself from trading.
  3. Do not use real pending orders, only virtual ones, then a frozen EA will not work during a tsunami.
  4. Do not use the locking (counter) positions, because the double spread is guaranteed to drive your deposit into minus. In this regard, it would be ideal to use netting accounts.

The implementation of such rules will significantly reduce the risk of bankruptcy.

 
Nikolai Semko:
...........

Forewarned is forearmed!

What are your thoughts on black swan defence techniques in EAs? And is it realistic to catch a wave?

I've had it before.

Only the profits are actually not that exorbitant.

 

Black swan forex

Eh, beautiful...

 
There is no defence against such an event. If you hit it, you hit it.
 
Nikolai Semko:

Even if you were lucky: you had an order opened in the right direction and without takeprofit, you did not have limit orders, you were not eaten by a margin call, and you managed to close the trade on time ...
Then the question remains whether your broker will be able to pay back your hard earned money.

Forewarned is forearmed!

What are your thoughts on black swan defence techniques in EAs? And is it realistic to catch a wave?

I noticed the movement in all the pairs, managed to close one negative position, which was closed by another plus position and made a profit. Only the brokerage firm said it was ruined and kept all of thousands of dollars. Uh-oh... I can't even remember what kind of firm it was - their pams were quite tasty in terms of conditions, which is why I opened an account there.

 
Alexander Ivanov:

Good morning!)


It's a spooky picture...)

A tsunami! I remember that day.

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