Trust You Are All OK

A short note to say that I hope all of you have not been hurt by the Swiss move on Jan 15.

So far two brokers have gone into liquidation:

  • Global Brokers NZ Ltd
  • Alpari Ltd (UK)

FXCM was able to find an angel in Jeffries Group LLC to enable it to stave off liquidation.

Huge losses have been sustained by HSBC, Citigroup, Barlays, and Oanda as a result of CHF moves following the SNB.

For those who don’t trade FX….you may not understand why some brokers have found themselves in difficulties.

Broker take a a safety deposit (margin) anywhere from 1% to 5%. A standard lot is 100,000. So, the  margin per lot range from $1,000 to $5,000.00 Now let’s look at Thursday’s move as a result of the Swiss announcement.

Figure is a daily chart of the USDCHF. If you were trading a standard lot (100,000), the move from about 1.0200 to .8400, represented a loss (or gain) of US$ 100,000.00.  The margins collected would have been inadequate to cover the losses. And, depending on your money management, you could have easily been in serious financial difficulties had you been short the CHF.

To those of us who were not in the CHF, that was a great new year’s present.

usdchf-d-2015-01-17.png

FIGURE 1 USDCHF

5 thoughts on “Trust You Are All OK”

  1. Hi Ray

    I have had a very bad experience with saxobank in 2008, although they didn’t go bankrupt,but they enhanced the spread to a ridiculious level.

    I find that it is now very difficult to choose a reliable broker.

  2. I’m perplexed, how can such a thing happen? And yet it does. If I had even a normal 2% position (entry to stop loss) long USDCHF that day I think my entire account would have been wiped. Unreal…

    I can’t think of anything that could have protect the account. This is the difference between trading on margin vs trading stocks. If the stock went under my account survives. Not the case with FX accounts.

    The most irritating thing is that even now, after the fact, I can’t think how one would have survived if he had a USDCHF long that day. Thoughts?

    P.S. Looking forward for the webinar recording! Was too late in the night for me, with a sick little kid no way in the world I could have attended unfortauntely!

  3. Hi Sorin

    Sorry to hear about your kid. Trust he/she is on the road the recovery.

    Webinar recording will be on its way probably Tuesday – we are setting up the the pages. It was a good event judging from the emails I received – only 4 but they were very complimentary.

    Turning to your question.

    The CHF price action was one of those events that no amount of risk management would have prevented your account from being at least severely damaged.

    I managed to escape simply because of a measure of luck and a habit I have formed, which to date, has kept me from the wrong side of these types of occurrences. Will share Monday.

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