Flows and Orders/FXWW News

Systematic traders need to re-assess Monday morning orders

Break traders took a hammering again on an illiquid Monday morning, and this time it was the CHF crosses that took the brunt of the volatility.

As we know the market is now controlled by the big Algos, be they at the banks, prime brokers, or hedge funds. Whether we like it or not, these electronic links are making it easier to access knowledge regarding order levels in the market. Those with the knowledge and the buying power can easily shift markets far enough to trigger stops and just because it’s an Algo doing it doesn’t make it any less wrong!

There are many things we can’t change but there are some small things that we can change so let’s concentrate on them.

  1. Check with your broker to ensure that they DO NOT share your order information through their Prime Brokerage arrangements. Orders should only be exposed to the market at large when the levels are reached.
  2. Don’t leave any stop entry levels on a Monday morning in Asia. Set your system up so that your trades don’t come online until Tokyo open at the very earliest.
  3. Use some common sense. Don’t be taking big leveraged positions over the weekend with tight stops.
  4. Manage your own orders in so far as you can. Your entry and stop-loss levels are your own intellectual property. When you are able to manage your own risk, do so.