Trading without SL. How to protect against flash crash?

mejayusa · Post by **mejayusa** » Sun Oct 09, 2016 1:21 pm

If I trade without SL, what mechanism or strategy should I use to protect against flash crashes such as the GBP crash that happened last week?

qvintus · Post by **qvintus** » Sun Oct 09, 2016 1:57 pm

mejayusa » 09 Oct 2016, 15:21 wrote:If I trade without SL, what mechanism or strategy should I use to protect against flash crashes such as the GBP crash that happened last week?

I don't think there is a protection at all against this sort of spikes.
Not even with stoploss! The broker criminals always come up with some excuses to take your money.

Post by **TraderJoeForex** » Sun Oct 09, 2016 10:19 pm

There is an answer and that is only trade a percentage of your total available trading funds at any time. If you are not using a stop loss then the broker margin call becomes your stop loss. Not recomended with leverage above 200:1 because you might well end up negative.

So keep your leverage 200:1 or less and in theory the worst that will happen is your account will blow and if you are with Global Prime or just lucky you might end up keeping most of your margin.

Now let's say you funded that account with 20% of your available trading funds. If there is a flash crash, or some crazy news or whatever else can and will happen at some point 80% of your trading capital is (relatively) safe.. it is in a lump of gold or your current account, or under your bed etc..

If (when) you loose your 20% then you start again. Hopefully you can make more than 20% before it happens again. This is the way I trade and I still use various SL strategies too.

mejayusa · Post by **mejayusa** » Mon Oct 10, 2016 11:09 am

TraderJoeForex » Sun Oct 09, 2016 10:19 pm wrote:There is an answer and that is only trade a percentage of your total available trading funds at any time. If you are not using a stop loss then the broker margin call becomes your stop loss. Not recomended with leverage above 200:1 because you might well end up negative.

So keep your leverage 200:1 or less and in theory the worst that will happen is your account will blow and if you are with Global Prime or just lucky you might end up keeping most of your margin.

Now let's say you funded that account with 20% of your available trading funds. If there is a flash crash, or some crazy news or whatever else can and will happen at some point 80% of your trading capital is (relatively) safe.. it is in a lump of gold or your current account, or under your bed etc..

If (when) you loose your 20% then you start again. Hopefully you can make more than 20% before it happens again. This is the way I trade and I still use various SL strategies too.

Thanks Joe. This makes perfect sense.

mlawson71 · Post by **mlawson71** » Fri Nov 18, 2016 9:58 am

That really does make a lot of sense and it's a good advice. I wish I had someone tell me that when I was a newbie.

Post by **SteveHopwood** » Sat Nov 19, 2016 12:16 pm

mlawson71 » Fri Nov 18, 2016 9:58 am wrote:That really does make a lot of sense and it's a good advice. I wish I had someone tell me that when I was a newbie.

If it is any consolation, most of us wish someone had told us stuff like this when we were noobs. Most of us are here with a common pool of noob blunders.

afeudale · Post by **afeudale** » Sun Nov 20, 2016 2:50 am

I had a few trades in the past without a SL that severely went against me...I learned my lesson.

I always use a SL now and it is generally far away from where I would normally exit - it's an "emergency exit". My EA does the calculations and money management and it is my primary exit, but the hard-SL is there to protect me if my EA fails, platform crashes, etc.

The SL is set on the broker side, so no matter what happens it will always close the trade if hit.

Think of it this way: if you have $10k on your trade and it goes against you, would you rather get out with $2k and live another day to trade or end up with $0?

I think the CHF flash crash a few years ago taught a lot of traders this lesson

mlawson71 · Post by **mlawson71** » Wed Nov 23, 2016 11:21 am

SteveHopwood » Sat Nov 19, 2016 12:16 pm wrote: If it is any consolation, most of us wish someone had told us stuff like this when we were noobs. Most of us are here with a common pool of noob blunders.

True. It doesn't make it hurt any less or make one cringe less when the memory resurfaces, but it's true.

qvintus · Post by **qvintus** » Wed Nov 23, 2016 11:37 am

afeudale » 20 Nov 2016, 03:50 wrote:
The SL is set on the broker side, so no matter what happens it will always close the trade if hit.

I think the CHF flash crash a few years ago taught a lot of traders this lesson

A hard stoploss won't help you in a flash crash.Sad but true.

afeudale · Post by **afeudale** » Wed Nov 23, 2016 12:58 pm

qvintus » Wed Nov 23, 2016 6:37 am wrote:
A hard stoploss won't help you in a flash crash.Sad but true.

Not necessarily true. Some of those who had a hard stop loss that wasn't triggered during the CHF crash were compensated by their broker. Those without a hard stop loss were on the hook for the losses.