Post by traderAllen on Jan 17, 2015 9:34:16 GMT -5
When I first got to my trade desk the morning of the Swiss national Bank decisions that sent the markets head over heels. My first thought was holy crap I'm glad I'm not in this mess. I sat and watched the markets flying all over the place all I could think about was traders losing money because that's exactly what was happening. My wife had gotten up, and I walked in and told her I'm not sure what's going on, I have not checked the news yet, but I know lots of traders account you getting wiped out the moment. Long's, shorts, it doesn't matter. And sure enough I was right. Traders lost millions, so much so that after their accounts with to zero, the brokers lost millions more trying to cover the traders margins.
Think about when the broker reports they lost over 200 million that's above and beyond the cash that was of these traders accounts. Many traders woke up to find their accounts and the negatives, some so much so that the likely to lose their houses. Log into the trading chat, and the first message to get out to people was to "sit on your hands". It's a hard thing to do sometime, but as a trader it's a behavior that has to be learned. You only trade when you have an edge. When the markets are extremely volatile you have no edge. And 4X as was on this day the spreads were so wide that stops are of no use. Those traders that had stops in place found that trades getting filled thousands of dollars away from where their stops were set. You have to resist the urge to trade these extremely volatile markets.
Sure it's possible you could make some money. But the first rule of being a successful trader is to protect your capital and during times of market turmoil that's your first priority. Just as we talked about in the chat, I made the point will get a chance to trade when the market comes down. And when the market finally calmed down we started trading and had several successful trades. For us it was a good day because we followed rule number one protect your capital.
So what are some lessons to learn here? First, scalping is one of the safest ways to trade because of your limited time the market and the fact that when you are in the market your monitoring real-time. Second, sit on your hands and do not place trades in an extremely volatile market where you have no edge. Third, do not over leverage your account for those outside the United States just because you can trade up to 1000:1 leverage doesn't mean you should.
Think about when the broker reports they lost over 200 million that's above and beyond the cash that was of these traders accounts. Many traders woke up to find their accounts and the negatives, some so much so that the likely to lose their houses. Log into the trading chat, and the first message to get out to people was to "sit on your hands". It's a hard thing to do sometime, but as a trader it's a behavior that has to be learned. You only trade when you have an edge. When the markets are extremely volatile you have no edge. And 4X as was on this day the spreads were so wide that stops are of no use. Those traders that had stops in place found that trades getting filled thousands of dollars away from where their stops were set. You have to resist the urge to trade these extremely volatile markets.
Sure it's possible you could make some money. But the first rule of being a successful trader is to protect your capital and during times of market turmoil that's your first priority. Just as we talked about in the chat, I made the point will get a chance to trade when the market comes down. And when the market finally calmed down we started trading and had several successful trades. For us it was a good day because we followed rule number one protect your capital.
So what are some lessons to learn here? First, scalping is one of the safest ways to trade because of your limited time the market and the fact that when you are in the market your monitoring real-time. Second, sit on your hands and do not place trades in an extremely volatile market where you have no edge. Third, do not over leverage your account for those outside the United States just because you can trade up to 1000:1 leverage doesn't mean you should.