How well does stop loss work if a disaster strike?

snapdragon1970 posted:
The phones start ringing before the news comes out,your buddy in Tokyo is screaming at you down the phone! Larger orders are more difficult to close around disasters but they are first in line,its been known for traders to close the wrong positions or hit Buy instead of Sell at times like you describe,brokers servers aren't fast enough to keep up with the orders at a time like this,I'm sure you have seen on charts where the price has jumped through major support areas with missing bars.At the end of the day its up to the broker weather they honour stop losses at a time like this,depends on the contract you signed up to.You can pay extra for a guaranteed stop loss if your trading overnight or news,at lease you have some protection.

Londonkicks posted:
Hi thats a bit of a tough question to answer as it depends on a lot of different factors such as broker/instrument traded/type of news release etc,
In normal market conditions your stops should be triggered at the price you request,but in general trading around news events is tricky as stops will not always get triggered at your requested price(stops do not guarantee price just an exit)
If liquidity providers pull out of the markets brokers can not execute your stop,thus you will incur slippage and that will be very large for say the tsunami or swiss franc peg removal as well as other crashes the markets have seen,
this is because everybody wants to get out of the wrong side of their trades and depending on the size of your order
(large orders execute first then go down in size so if your a small size you will have more slippage) market makers and brokers do not want big losses so either stop giving prices or suspend orders.
I have seen client slippage of 300+pips around major disasters.
best to stay on the sidelines when there is a big news event,as for disasters these can not be predicted so that is just part of trading but happens very rarely

Hope this helps regards
Londonkicks

lou111 posted:
Hi,

I was wondering how effective is a stop loss if you are trading a liquid currency or commodity under normal conditions without any major news , compered to a day where you have a major news or a disaster like Japaneses tsunami while trading yen currency pair.

How effective were stop losses for traders who were trading yen while the news starting to come in .

Could you share your experiences in regards to effectiveness of stop losses when everybody is trying to exit the same trade as you?

Thanks,

arigoldman posted:
It doesn't work. I've been in situations where the stop was not triggered. See 15 Jan 2015 SNB decision.

arigoldman posted:
It doesn't work. I've been in situations where the stop was not triggered. See 15 Jan 2015 SNB decision.

tranle447 posted:
Should trade with leverage 1:2 maximum . In this case , there is no way your account would be wiped out , even a big disaster strikes.

lou111 posted:

arigoldman posted:
It doesn't work. I've been in situations where the stop was not triggered. See 15 Jan 2015 SNB decision.

That move was just devastating. And it happened in matter of minutes.

 

Could you share how did your trading change in regards to leverage after that SNB decision.

thanks

SofieAndreasen posted:
It depends on brokers' execution speed. But traders will face slippage.