BluePanther posted: I also lost a large chunk of risk capital from the Pound flash crash in 2016. These flash crashes are inevitable in Fiat Forex world. We have them in crypto as well. Market makers can pull their bids, or asks at anytime.
'It is not the AMOUNT of money you have that matters. What matters is the SYSTEM you use: No amount of money can save you if you have a bad system. Conversely, if you have a good system you can start with small money and easily become rich.' (Matthew Todorovski)
Since we have both been rekt from flash crashes, what are you doing differently?
1) I am more wary of Drawdown risk; I focus on maintaining Equity as close to 100% at all times, and will avoid Drawdowns as much as possible. I will never again tolerate a Drawdown exceeding 40% - NO EXCEPTIONS;
2) I am focusing on growing my accounts more “organically”, rather than “manufacturing” fast growth with higher risk; the 800% and 1000% gains partially fed my complacency and greed, and did not favour a better appreciation of the gains I had made;
3) I use better systems; the system that caused my margin calls was a counter-trend linear-sequence cost-averaging EA (commonly mislabelled “grid-martingale”), with minimal filtering for market-entry;
4) I no longer mirror my trades across my accounts; I knew the cross-account risk was a bad idea, but I expected the large equity and non-aggressive EA would have survived any market move - but I didn’t expect an exceptional market move like the YFC;
5) I will be more wary of trading over Christmas / New Year; I will cease trading on most of my accounts, and keep only a few (or only one) account active;
6) I am scaling risk across my accounts, from low to high risk; I will permit my higher risk accounts to fail, and I will not shift funds in order to save an account.
Every cloud has a silver-lining; my losses have:
a) hardened my resolve to find better systems that can survive (even thrive) from such volatility;
b) helped me gain some valuable experience.
'I once read an interview with a hedge fund manager, who had one of his traders lose $50 million on a trade. When asked if he was going to fire that trader, he replied “Are you nuts? We just paid $50 million for him to learn that lesson – why would we pack him up and ship him off to another hedge fund to benefit from it?”
(Christopher Lee, independent trader, www.pipmavens.com/blog/trading-in-public