Tail risks for retail traders: what's protection worth?
Retail traders can't buy the hedges institutions use, but they can size for tail risk: smaller positions, wider stops, less leverage, more cash. Protection through design rather than instruments.
What's your tail-risk design?
- how you size for outlier moves
- the scenarios your plan survives
- the tail event that reshaped your sizing
Background: the SNB shock and weekend gaps.
Background: Weekend gaps: why prices jump when the forex market reopens
Currencies stop trading on Friday evening, but the news doesn't. What happens to your positions and stops when the market reopens at a different price.
What is a weekend gap in forex?
A difference between Friday's closing price and the first price when the market reopens on Sunday, caused by news or events over the weekend.
Will my stop-loss protect me from a gap?
Not fully. A standard stop is triggered when the market reopens and fills at the first available price, which can be beyond the stop. Guaranteed stops, where offered, avoid this for a fee.
Comments
Log in to join the discussion. Comments follow the community guidelines.
Log in to commentLoading comments…