A painful lesson in markets from five years ago

Author: Justin Low | Category: News

Never ever say never and you can always expect the unexpected when it comes to trading financial markets

15 January 2015 will forever be a historic day in the FX market as the SNB surprised the world by unexpectedly announcing a removal of its EUR/CHF peg/floor at 1.2000.

Chaos ensued in markets with plenty of people left having to deal with tough losses and seeing their lives changed in an instant. Plenty of traders got wiped out and many brokers also went bust when the event transpired five years ago.

In the aftermath, the SNB and Thomas Jordan certainly got a lot of flak for the timing and the somewhat misleading statements in the lead up to their decision.

And that will serve as a key lesson for all central banks on the notion of credibility - something which I would argue that the SNB has not gotten back since, and may never will.

For traders and investors, it is a painful lesson that sometimes you can do everything right but still get caught out by something unexpected and unpredictable such as this.

However, good risk management will allow you to survive such testing times and it is a reason why more experienced traders will always stress on the importance of that.

In any case, the event certainly highlights the risks involved in trading financial markets and hopefully nobody should ever forget that.

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