WTF With Moody and The Problem With Forex Stop Orders

By Lawrence

Last Friday Moody downgraded Cable after US stock market closed which led to a melt down within minutes. Making the situation worse, it was the last hour of the week that many traders like me always close their positions during this last hour. One have to wonder if it was a planned attack on the longs?

My stop order was not handled the way it was supposed to be. Somehow the stop order was triggered but not the whole position was closed. Instead, part of it was not filled and a requote-confirm mechanism at the brokerage end leaving part of my remaining position open due to the fact that the price has already slipped so much away from my stop order. The brokerage side tried to confirm if I really wanted to fill at the much lower price.

I was not there to make such decision hence the remaining position was not taken care of. Luckily at the last few minutes of the day, my end of week go flat mechanism kicked in and closed out the remaining position. I have a lot of investigation to do tonight / tomorrow. I need to find out why the brokerage side doing what they did. It makes no sense to me.

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Comments
  • MidKnight February 26, 2013 at 11:13 pm

    WTF Moody indeed! Sorry to hear about the stop loss issue with forex. Not all brokers do the re-quote thing. Off the top of my head there could be a couple of areas that the problem lies within.

    – Broker has fast moving market “rules” that trigger their re-quote process.
    – Position size exceeded the brokers per trade execution.
    – Maybe even your broker has time of day liquidity constraints that further limit size and/or triggering of their re-quote process.

    I know – it’s quite a mess with forex and finding out the ins and outs as it does vary somewhat from broker to broker. Please let us know what the issue was when you get to the bottom of it.

    With kind regards,
    MK

  • Lawrence Chan February 27, 2013 at 10:38 am

    What happened was that the position was sizable and I have to break up the stop order to multiple orders in order to put the orders thru with their gateway to guarantee no re-quote. It’s working fine for a long time (several years).

    Somehow, when the mkt get close to the price level so quickly and suddenly, it has not enough time to move all my orders to the inter-bank level. Hence the failure.

    Am still working on a solution to avoid similar problem in the future.

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