This past week we all had or should have had a shocking wake up call when the Swiss National Bank (SNB) made a financial decision that had a black swan effect in the global markets.
The SNB’s move not only disrupted traders, hedge funds, Swiss exporters and banks, but it also hit several forex brokers very hard.
It Impacts Us All
If you truly understand the impact of this on the brokers and your trading colleagues, then you would not be happy or proclaiming things like one ignorant and vindictive trainer did in a recent email:
“I have seen news of many smaller dealers going under,and in my opinion, rightfully so!”
This is bad news for all traders when a brokerage firm, like an FXCM who was one of the 1st brokerge firms in the US to offer forex trading, is hit hard and faced with a cash crisis. When PFG went under due to owner fraud, it affected us all…we either lost all of our money in our accounts or we knew someone who did.
It impacts us all. If we do the Happy Dance at the expense of someone else’s misfortune it is disrespectful to all of us.
Instead, why not take the high road?
What Important Lessons Can We Learn?
1. Having a plan to manage risk is only as effective as your ability to act on the plan in the face of adversity
Take FXCM for instance. They had a risk management plan in place as required by the NFA, but clearly there was some kind of internal breakdown during this crisis. I expect that in the days/weeks/months ahead we will come to understand the real story behind what happened at FXCM.
Think about your own ability to do what is necessary in a crisis.
2. Luck plays a big part in any winning investment or trading position.
If you were one of the traders who benefited from this crisis, do not personalize this as something you were brilliant about and go around pounding your chest like this egocentric trainer did:
“I am most proud to report that in the face of catastrophic bank news my dealer cycles held true! “
There was no way any one person, hedge fund, bank or methodology could have seen this coming or would have been able to predict the magnitude of the SNB’s announcement.
It was a black swan event…pure and simple.
If you lost money because of the SNB announcement or you made a windfall and your broker is no longer in business, I want to say I am truly sorry.