Gold/Silver futures players, how do you handle the possibility of a "Flash Crash"?

BigE

Like what happened to the stock market, a lot of people lost heavily when the stop losses were hit momentarily, only to jump back to levels higher than before with them being left out in the cold. Do you just ignore the fact that it could happen in the commodities market?. Surely this quirk in the market must keep some players away, ultimately lowering the price of PM's. Just wanted to discuss this after I noticed the CME DROPPED margin requirements for some PM's today----------BigE

derryb

why play "futures" when i can play "nows"

RedTiger

Plan for the possibility by right sizing of positions. Big one day moves are certain to happen, it is a matter of when. On average for the stock market, about once every three years there will be a 5%+ intraday move no matter the news, no matter the market conditions. Obviously, during "interesting times" with big news events that may occur more often. If a big move will wipe a player out, and that player stays at a high leverage level for extended time periods, it mostly a matter of time before those kind of players get wiped out. Certain market conditions are more ripe for big moves than others, but sometimes news is big enough, and unexpected enough that the big moves can happen at any time.

Bear

Red tiger, good response. One that can be understood even by fuzzy little bears like me.

BigE

A good move would be placing an automatic buy offer at 33% below the price of the contract you currently own, with no automatic stop loss in place. If they do play games a flash crash would work in your favor. I agree, its best to have plenty of money with the broker to cover the margins because, after all, the whole reason for these "events" is for the big fish to eat the small fish or for the big Tree to shade out the small Tree--for a different point of view-----------------BigE

jmski52

When you are running toward that light at the end of the tunnel, make sure that it is in fact the end of the tunnel and not a train.

BigE

Trees dont run into tunnels, we ride on the back of Mack trucks--------BigE

RedTiger

<< <i>A good move would be placing an automatic buy offer at 33% below the price of the contract you currently own, with no automatic stop loss in place. If they do play games a flash crash would work in your favor. I agree, its best to have plenty of money with the broker to cover the margins because, after all, the whole reason for these "events" is for the big fish to eat the small fish or for the big Tree to shade out the small Tree--for a different point of view-----------------BigE >>



During the stock market flash crash, the orders close in on individual stocks were honored, the orders far out were not, and those trades were cancelled. The most dangerous thing would be to get filled on the -33% order and thinking you have added to your position. Then the market recovers to say -20% and you sell to take a profit on that. The -33% order gets cancelled as being too far out, and the -20% order is honored and ends up being a short sale. This kind of thing actually happened to some stock day traders during the flash crash, as some orders were honored and others were cancelled.

BigE

Thats why I feel 33% less would work, how could they not honor that purchase when we are close to 1/3 off recent highs now. I did not hear of people only losing 20% on the stock market flash, nor of those only being able to purchase for 20% less--must have been a nightmare to figure out who won what and who lost. Maybe only the squeaky wheels got greased-----------------BigE