How much costs a trader failure and how to protect yourself from unwanted losses?

Trader watch their screens on the Troika Dialog trading floor in Moscow

World markets are quite cruel for traders, as well as trade was not only beyond the lucrative, but also gave the matter a great burden of responsibility. Even a simple platitude can affect the result of trade. For example, a trader simply mixed buttons for sale, accidentally pressing the wrong, that it was necessary. Sometimes a trader due to simple technical errors may suffer significant losses, some companies such errors brought losses amounting to billions of dollars. Trade-24 attacking seemed to remind all market players about the probability of loss, as well as specify a few tips on how to not open and make transactions.

How to lose money by carelessness?

“It`s so easy”, the experienced trader can answer to you and even smile, because rarely there were times when even the most advanced market shark had mistaken. However, this happened in the early stages of trade, only when going through a training and entry into the market. However, as practice shows, even beyond the experienced players in the market have led their companies to enormous losses.

The first such case is the recent history on the Tokyo Stock Exchange in 2011. One of the traders of the company «Mizuho Securities» has decided to sell only one share of the world famous company «J-Com». However, due to his negligence he committed an order to buy 610,000 shares of the company at a price of one yen. The response to such a mistake was instantaneous, but the system does not provide an opportunity to close the erroneous transaction. As a result, the world famous company «Mizuho Securities» has lost $ 321 million, which has led to a drop in Japanese stock exchange Nikkei 225 index at the point 301. After that, there was a huge scandal on the stock exchange, the head of the exchange itself was removed, after which there were lawsuits with attempts to revise the number of transactions.

oshibki-trejderaThe second example occurred just less than six months. In September 2016, a trader of famous company «J. P. Morgan Securities Japan », had to sell two packets of shares. However, due to the movement in the market and his personal workload, he completely random sold erroneous actions, and not those who wanted to. After the incident, the trader immediately bought a lost stake that is now much more expensive. Because of this “deal”, the company received a net loss of $ 50 million.

But the third case occurred in a rather comical manner, but it was an unpleasant blow to the reputation, but also gave a multi-million dollar losses. Thus, the trader of well-known company «UBS Warburg», conducting a number of trade operations, committed two errors: first, he placed an order to sell 610,000 shares at the cost of 6 yen, which was significantly below the market value, and then he wanted to sell only 16 shares at a price of 600 thousand yen. This operation cost the company losses, which equated to £ 71 million.

The fourth case was so tragicomic, that the trader due to the carelessness, even mixed currency. In November 2002, a broker made a mistake, which chose instead Euro the British Pound, and didn`t vice versa as it should be. By selling shares of well-known company «Ryanair», it caused panic in the market conditions, which had raising the stock market index performance in London by 61 percent – from 404 to 653 points. This seemingly small mistake led to huge losses of $ 1.2 billion for the stock exchange and the company itself.

Lehman BrothersBut the latter case the trader become the apotheosis of stupidity. In 2007, a well-known US investment bank Lehman Brothers Holdings, Inc has received deserved due to a number of questionable transactions with possible fraud. However, the broker conglomerate, who gave trade reports to the stock exchange after the auction, has filed to report the error, where he made a mistake of counting the “zeros” in number. Exchange immediately filed a complaint, arrested the property and the company’s shares, after which the total amount of fines and penalties amounted to a cosmic sum of $121 million of assets and seizure of $250 million passive income. After that, the bank found itself bankrupt and ceased to exist in less than a year in the course of the 2008 financial crisis.

How to protect yourself from possible losses?

As you can see, even experienced traders are not able to be 100% sure that they can stay in the profits. It is also worth adding that because of carelessness and confidence, that you can quickly win back the lost, market players start to play even greater amount of companies that they represent. Based on the above examples committing loss, Trade-24 analysts  decided to make a few suggestions, that are sure to be done before the trading operation. Also, the data should review carefully for those, who trade for a long time and, as a trader is confident, reliable.

Advice №1. Always open the transaction carefully without haste

When you are spending the opening of the transaction, pay attention to three important parameters – is it  committed to purchase or sell, what tool will be used (in the case of forex – what currency will be the main, and which -the second), and are there exhibited indicators of profit and stop bargaining in the case of loss. Also try to check the open trades often as possible (at least 2-3 times a day) to see the current position of the position.

Advice №2. Check your future operations several times

After the opening of the transaction and check all the basic settings, duplicate it yourself before bidding. This will help you identify – any error or omission whether admitted in this operation. As in the case of failures, software or trading system of control does not immediately allow you to cancel the deal, but only after a certain period of time after which there will be losses.

Advice №3. Open transaction in common with analysts

1320541635133The most successful method of opening by the transaction venerable traders and experts advise to do it together in cooperation with market analysts. After all, while checking all the parameters and conditions of duplication financial transaction specialist will also be at the event as help to clarify the scope, risks, terms of profit and loss, and they will select the best options in the context of risk management. Naturally, for such trades should be a sufficient amount of time and money, but even small good deals much better than large-scale failures.

Advice №4. Adjust all open positions online

The main condition of financial transaction is permanent supervision for own positions. In case of trouble or failures of transactions, the existence of  Stop Loss (SL) and Take Profit (TP) points, instructions from an analysts, who monitor your transactions and account, will never be superfluous. It should also be added, that for a better understanding of the positions and the likely expectations of it, we recommend you constantly read analytical and technical analysis reviews, keep listening to the instructions of your staff.

Summing up, analysts of Trade-24 company note, that even an experienced trader would never be immune to the troubles and losses. But this care, coordination of actions with the experts your broker control open positions will help to avoid unintended consequences.


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