Catastrophic event

tar

tar

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If u r scalping , do u protect yourself from catastrophic events ? ie : If daytrading indices then trade shorts only , buy deep OTM puts , or u dont have any protection at all ?
 
Yes. otm puts essential for position or swing trading, recommended for scalping also. playing with fire otherwise
 
Protection from global catastrophic events is simply trading lower size such that unthinkable massive gap swing against you won't kill your account, just bang it up a bit. Because scalping doesn't involve overnight risk there is really very little event risk anyway and your market wouldn't gap too far too fast in a liquid market. I use stops ALWAYS when I scalp but often the stop is just in case the market tries to run away from me very quickly. When in a losing position often I exit before the stop is hit.

Peter
 
wackypete2 said:
Protection from global catastrophic events is simply trading lower size such that unthinkable massive gap swing against you won't kill your account, just bang it up a bit. Because scalping doesn't involve overnight risk there is really very little event risk anyway and your market wouldn't gap too far too fast in a liquid market. I use stops ALWAYS when I scalp but often the stop is just in case the market tries to run away from me very quickly. When in a losing position often I exit before the stop is hit.

Peter
Click to expand...

liquidity will disappear in case of a " catastrophic event " , 5% in indices is nothing but for daytraders is something , ie : 5 % on the Dax = 350 points , Eurex simply will halt trading then open again with a big gap ...
 
tar said:
liquidity will disappear in case of a " catastrophic event " , 5% in indices is nothing but for daytraders is something , ie : 5 % on the Dax = 350 points , Eurex simply will halt trading then open again with a big gap ...
Click to expand...

OK, then that would be a bit troublesome, I agree. I'm trading spot forex where the would be no halting of the market. Even so take a test. What is the largest gap on the EUREX in the past 20 years or so? Double that and calculate what you would lose if you were trading normal size.

Even during the world trade center attacks here in the US the EURUSD had around a 350 pip range that day and it wasn't a gap. (disclaimer: I wasn't trading forex then, only stocks). If I was trading forex then exactly as I trade it today I'd still be in business although hurting a bit.

Peter
 
if ur scalping and keeping your disaster stops not stupid distance away (like 50%), in a catostrofic even you should be Ok because it will pass through different newswires at different times so unless your stop is far enough that everyone can pull their liquidy from the mkt you should be alright. i mean your stop will get taken out before there is no liquidy left.

the biggest risks are going into caledner releases where wveryone scales back their liquidy going into the figure to avoid situations like these. then you can gap loads without a print for quite a chink before your stop is even triggered (depending on the nature of your stop).

also for scalpers changing from long to short happens alot even intra day so crossing the spread for calls and puts is going to be costly. and just buying both is the same as scalping for gamma i think
 
wackypete2 said:
Protection from global catastrophic events is simply trading lower size
Peter
Click to expand...

if your position size is taking into account a 30% crash then you gonna be wasting your time, as each trade size will be so small relative to capital. the best way to hedge exposure and get some decent size on is to provide some protection with options.
 
DashRiprock said:
if ur scalping and keeping your disaster stops not stupid distance away (like 50%), in a catostrofic even you should be Ok because it will pass through different newswires at different times so unless your stop is far enough that everyone can pull their liquidy from the mkt you should be alright. i mean your stop will get taken out before there is no liquidy left.

the biggest risks are going into caledner releases where wveryone scales back their liquidy going into the figure to avoid situations like these. then you can gap loads without a print for quite a chink before your stop is even triggered (depending on the nature of your stop).

also for scalpers changing from long to short happens alot even intra day so crossing the spread for calls and puts is going to be costly. and just buying both is the same as scalping for gamma i think
Click to expand...

but there is no guarantee my stop will be filled even with slippage ...
 
eminiglobex said:
if your position size is taking into account a 30% crash then you gonna be wasting your time, as each trade size will be so small relative to capital. the best way to hedge exposure and get some decent size on is to provide some protection with options.
Click to expand...

I disagree. I scalp for 10-15 pips per trade, maybe 5-10 trades per day. Options are a waste of my money as the cost will put me in a negative expectancy. Options are not for scalpers. Most of my trade have a lower risk than swing traders use. I can't speak for anyone else but I have very little event risk, and trade with a lower account risk per trade than most swing traders, I do very well, and sleep good every night with no open positions.
Using options when swing trading is completely different but the OP clearly mentioned scalping.

Just my 2 cents...


Peter
 
tar said:
but there is no guarantee my stop will be filled even with slippage ...
Click to expand...

if its a mkt order then eventually someone will make a bid/offer to make an arb somewhere, so you are very likely to be filled at some price.

but thats true of all mkt orders. what im sayin is keep your disaster stop near enough that it is likely to be hit before all the liquidity is gone. outside the daily range is way near enough for markets to be liquid but way far enough if you are scalping.

and be flat into nfp, fomc etc...
 
Simply stated, if you are overly worried that a catastrophic event will wipe you out then you are trading wrong, no matter if you are position trading, swing trading, or scalping. Take measures to preserve your account.

Peter
 
DashRiprock said:
if its a mkt order then eventually someone will make a bid/offer to make an arb somewhere, so you are very likely to be filled at some price.
.
Click to expand...

true ,but most likely after the gap maybe ...
 
tar said:
true ,but most likely after the gap maybe ...
Click to expand...

if you have your stop near enough that it doesn't take the 4 horsmen of the apocalypse to trigger then you should be ok. before you get to the 4 horses you go pass "sh!t something bads happened I'm out!" and thats where the stop goes, where there will still be liquidity and slippage will be in the order of ticks not handles.

anyway all the scalpers I know have disaster stops that are measured in ticks away :confused:
 
wackypete2 said:
Simply stated, if you are overly worried that a catastrophic event will wipe you out then you are trading wrong, no matter if you are position trading, swing trading, or scalping. Take measures to preserve your account.

Peter
Click to expand...

I am not overly worried :D , i wanted to know if daytraders consider some protection measurements like swing traders , beside using stops of course ...
 
tar said:
I am not overly worried :D , i wanted to know if daytraders consider some protection measurements like swing traders , beside using stops of course ...
Click to expand...

I didn't mean to imply you were, I just stated my opinion :smart:

Peter
 
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