It has been just over six months since Black Thursday took the Forex market by surprise and caused monumental losses around the entire globe. This left many questioning whether or not it could have been avoided and if not, what could be done to prevent another Black Swan event of such magnitude? The bottom line here is what have we learned? If an event causing losses estimated in the trillions could take the world by surprise, many Forex traders are looking at what the industry has done to protect them going forward.
The Need for Circuit Breakers
Without getting into the whole SNB debacle that caused such pandemonium in the Forex market, the one ‘take-away’ from all this is that there needs to be some way to call an immediate halt to trading in the event that the market goes haywire again. These are called ‘circuit breakers’ in the industry and they are a means of literally stopping all trading the moment the market goes all over the board. If more of these had been in place on Black Thursday, many seasoned Forex traders and brokers believe we wouldn’t have seen such catastrophic losses.
Brokers Forgiving Negative Balances
One of the main complaints which many traders had is that because of such substantial losses, traders went into huge negative balances. This, for simplicity’s sake, is where you lose more than you have invested and end up owing the broker money. Because of the ability to trade with an extreme amount of leverage, this is quite possible, and as we have seen probable, if brokers can’t or are unwilling to forgive those amounts. Innovative brokers have stepped up to institute negative balance forgiveness programmes so that traders can once again enter the market without fear of owing amounts above and beyond their investment capital in a Forex account.
Staying in Touch with Other Traders
Another thing that has come to light since Black Thursday is that there were some traders and brokers who actually foresaw an event like this taking place so they hedged conservatively and lost little. Some even gained through the chaos. Brokers such as Synergy FX in Sydney Australia have not only instituted a negative balance forgiveness platform but are also highly active on social sites in order to offer advice and network with traders who have concerns. Whilst you may not want to heed the advice of other traders and/or brokers, it is a smart move to listen to what others are saying and doing. Networking can help you grow your investments but can also prevent losses if you heed the warnings of seasoned traders.
So then, what have we learned from Forex Black Thursday of 15 January, 2015? To sum it up, there needs to be some way of immediately calling a halt to ALL trading when the market goes berserk and brokers need to join the ranks of others who are forgiving negative balances. It is also essential to form and join communities of Forex traders so that wisdom can be shared within the group and as always, it is vital to stay continually in touch with the currencies market so that you can act quickly if needed. Can we prevent another Black Thursday? Maybe not as they are historically unexpected Black Swan events but we can take steps to mitigate such huge losses – and that is the bottom line for any trader, large or small.