How to avoid the possible loss or even stock explosion caused by the slippage of major news events or data release
For the short-term traders in the external exchange day, the slip point is the last situation. Intraday short-term traders hold positions for a very short time, and they will make multiple trades in a trading day. The average daily volatility of its mainstream currency pairs is generally in the range of 50-80 basis points. According to the actual market volatility, short-term traders will lock each profit range at about 10 basis points, or even less. If the entry price selection is not very reasonable, and then encounter the sliding point situation, it is almost impossible for short-term traders to have profit space, and to bear potential losses and transaction costs. Therefore, day short-term traders are very concerned about the transaction cost of "spread" and the fluency of trading such as sliding point. Transaction cost and trading fluency determine the choice of short-term foreign exchange traders.
Usually, in order to avoid the occurrence of sliding point, intraday short-term traders generally choose the market with high liquidity and volatility. The foreign exchange mainly includes euro / US dollar, USD / yen, GBP / USD and aud / USD. Among them, GBP / USD and euro / USD are the most interested markets for ultra short-term traders. Generally, the transaction liquidity of these assets is abundant, the occurrence of slip point is less, and the point spread cost is low.
For band or medium and long-term traders, the slide point has little impact on the overall trading and investors' mentality. As long as it is not extreme market conditions, it is acceptable. In extreme market conditions, the damage caused by sliding point will be devastating, and the result can not be controlled.
give an example:
Within minutes after the announcement of brexit, the British pound plummeted to 500 basis points, and then continued to plummet by hundreds of basis points in the following hours, nearly 1000 basis points in the world. If a trader enters in the opposite direction to the market during brexit, his stop loss setting will be invalid in the plummeting market and will not be able to stop effectively.
The daily average volatility of GBP / USD is generally around 70-110 basis points, while during the period of GBP flash crash on October 7, 2016, the daily average fluctuation of GBP / USD dropped from 1.2600 to 1.1800, with a drop rate of 800 bps. During the collapse of the pound, if you choose to go long, you can enter the market smoothly, but it is difficult to leave. Because there are too many short transactions, the stop loss order of long position is to sell the pound / dollar assets held, which is a short transaction for the market. Similarly, under such extreme circumstances, if a trader's short position makes a large profit, he can close his short position at any point to gain profit and leave the market, because the short position's exit order is multiple entry to the market.
Here, three suggestions are given on how to avoid the loss caused by sliding point in trading: lock the potential profit and stop loss space at more than 30 basis points, so as to prevent stop loss triggered by accidental price fluctuation. Try to clear and leave the market before the release of important news data, and do not participate in the trading of important news data. Try not to hold positions for the weekend.