Curriculum·R404 Execution and Trade Craft·about 43 min
Stop placement
By the end of this lesson you can
- →State what a stop order actually is, and what it does not promise
- →Place a stop at invalidation and check it against the market's ordinary range
- →Compute the gap between an intended loss and a realized one when a market gaps
- →Decide when a guaranteed stop, a smaller size or an option is the correct instrument
Senior · enrolled learners
This lesson opens with The Swiss National Bank floor removal, 15 January 2015.
- What happened
- The Swiss National Bank set a minimum exchange rate of 1.20 Swiss francs per euro on 6 September 2011, promising to enforce it with the utmost determination and to buy foreign currency in unlimited quantities, and it reaffirmed that commitment in those words as late as 18 December 2014. On 15 January 2015 it discontinued the floor without warning and announced a cut in the rate on sight deposits to -0.75 percent. The franc rose by around 30 percent against the euro shortly after the announcement. In its own published account, FXCM said executable liquidity fell to nearly zero two minutes into the move and stayed almost absent for about 40 minutes, that quotes from its providers ranged from 1.12 to 0.57 within the same seconds, and that it had little ability to execute client stop orders because there were almost no executable quotes; most of its clients exited between 1.02 and 1.04. Retail clients at several brokers ended with balances below zero: FXCM said clients owed it about $225M, Alpari UK said the majority of its clients had lost more than their account equity and entered insolvency, and Swissquote set aside 25M francs. The following day Leucadia lent FXCM $300M as a senior secured term loan with a two-year term and a 10 percent coupon.
- The decision point
- A stop placed correctly and resting at the broker was still an order to trade at market once triggered, and there was no market to trade in. A stop promises that you will attempt to leave at a price, not that you will leave at it, and the difference between the two is the entire content of this lesson. On this lesson's reading, a client who had done the arithmetic only on the intended loss had sized for a price that never traded.
What you will be able to answer
- →What is a stop order?
- →Where does a stop belong?
- →What did the gap cost?
- →What are the three answers to gap risk?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.cnbc.com/2015/01/16/snb-victim-forex-broker-enters-insolvency.html
- https://www.swissinfo.ch/eng/fxcm-faces-losses-as-swiss-shock-leaves-alpari-uk-insolvent/41219974
- https://www.snb.ch/public/asset/en/www-snb-ch/publications/communication/press-releases/2011/pre_20110906/publications0_en/pre_20110906.en.pdf
- https://www.snb.ch/public/asset/en/www-snb-ch/publications/communication/press-releases/2014/pre_20141218/publications0_en/pre_20141218.en.pdf
- https://www.snb.ch/public/asset/en/www-snb-ch/publications/communication/press-releases/2015/pre_20150115/publications0_en/pre_20150115.en.pdf
- https://www.financemagnates.com/forex/brokers/fxcm-publishes-data-of-snb-mishandling-of-the-swiss-franc/
- https://www.forbes.com/sites/deanpopplewell/2015/01/15/flash-crash-ensues-after-swiss-drop-euro-cap/
- https://www.fca.org.uk/news/press-releases/fca-confirms-permanent-restrictions-sale-cfds-and-cfd-options-retail-consumers
Confidence high·Volatility low·Reviewed 2026-08-07·Owner unassigned
Contested
The intraday low for EUR/CHF on 15 January 2015 is disputed and differs by venue and feed. FXCM's own account, which is the most detailed published one and comes from a firm with an interest in blaming the market rather than its systems, records quotes from its liquidity providers as low as 0.5696 and an EBS bid of 0.50 for one second, with the market trading somewhat consistently above parity only from about 04:55 GMT; a contemporaneous Forbes column put the pair near 1.00 and called the official low disputed. The lesson does not state a low. It uses 1.00 as an illustrative fill in the arithmetic, close to where the pair settled and a little below the 1.02 to 1.04 at which FXCM says most of its clients exited, not as the experience of any particular account.
An earlier version of this lesson said the floor had held for forty-one months, that the pair fell to 0.85 within about a minute, that stops filled hundreds of pips lower, and that Leucadia's financing was $250M of notes. The SNB's own releases date the floor from 6 September 2011, about forty months before 15 January 2015; no source read supports the minute-by-minute sequence; FXCM's account puts most client exits between 1,600 and 1,800 pips below the floor; and CNBC reports the financing as a $300M two-year senior secured term loan. All four are corrected.
Negative balance protection has since become mandatory for retail CFD clients in the UK (FCA, from 1 August 2019, following ESMA's 2018 temporary measures), which changes who bears the gap but not whether the gap occurs. Check the rule that applies to you rather than assuming either outcome.
S203-10 owns volatility and volume tools including range measures. This lesson uses them as an input to placement rather than re-deriving them. R402-02 owns the liquidation price, which per part four must always sit beyond the stop. Keep both splits.