Stock market crashes and financial crises are as old as money itself. From the tulip mania bubble of 1637 to the Wall Street crash of 1929 leading to the Big Depression, investors have gained and lost fortunes in a matter of days and hours. Now with the rise of online trading, these fortunes are made or lost in a matter of seconds.
In the last 10 years, since the financial crisis of 2008, there have been at least 7 major stock market crashes around the world. The markets have seen so much volatility in even the last 24 months, one would almost need a stomach made of steel to dip their toe in again. Unless, of course, they are trading with pioneering broker easyMarkets. Since 2003, easyMarkets has made online forex trading accessible to individual traders with their low-entry requirements, and user-friendly online trading platform. Over the years they have added more tradable assets including metals like gold and silver, commodities like oil and corn and the top global equity indices. As one of the longest running retail brokers, they have seen multiple market meltdowns and have continued to innovate their platform with tools designed to protect traders in the most volatile market environments.
Let’s look at some of the biggest market events that saw many other brokers and their clients lose big, but where easyMarkets was able to protect their clients and continue business as usual.
Financial Crisis of 2008
16 September, 2008 is a date not many are likely to forget. Some of the largest financial institutions in the US toppled over due to subprime real estate exposure and credit default swaps. The situation rapidly spread across the globe with major bank failures in Europe and trillions of dollars shaved off equities and commodities around the world. A decade later, and the global economy is still shakily getting back on track. US stock markets peaked the previous October with the DJIA index surpassing 14,000 points. On 19 September it went into a tailspin and lost 3,600 points. If you had been long on the Dow, it’s more than likely that your balance would have been wiped out and gone into negative territory. If you’d been trading with easyMarkets however, the only loss you would have experienced would have been the risk capital you’d defined for that one deal. That’s because they guarantee stop loss rates – the amount you’ve selected that you are willing to lose on any one trade, and what’s even more, they offer it for free!
SNB Unpegs the CHF from the EUR, 2015
It’s 15 January, 2015 and the Swiss National Bank (SNB) does the unthinkable and removes the EUR/CHF price peg. What ensues is a flash crash of the currency pair and a tidal wave that consumes the currency and stock markets around the world. In just 60 seconds the EUR/CHF loses 20% dropping from 1.2 to 1.00. Desperate traders try to trigger their stop loss but they are at the mercy of 25% slippage. Some brokers quotes leap 6,000 pips in just two seconds leading many traders into negative balances as their positions outstrip margin requirements. Some of the biggest global brokers lose multi-millions of dollars and are forced into insolvency. Others suspend CHF trading for the period.
However, easyMarkets (at the time under the name of easy-forex), was able to confirm that risk management systems that were already in place protected their clients from negative balances and were reported in the LeapRate coverage of the event. Essentially, any client with an open position on the EUR/CHF, at the time, only lost the amount of that one position as their margin call triggered, something that can only be covered by brokers that guarantee negative balance protection. Not a single easyMarkets client had to suffer from slippage or see their account go into negative. Since the crisis of the unpegging, many regulators have tightened conditions to protect traders, which again, has seen many industry players left out in the cold. As easyMarkets was already in the business of protecting their clients’ interest, it was once again, business as usual.
Here’s another note – what if you were on the winning side of that trade? Many brokers that offered variable spreads, either disabled trading or widened spreads so far that it was difficult for traders to take advantage of the price move. easyMarket traders however were able to enjoy fixed spreads, meaning that the spread shown at opening is the spread at the closing of the deal. If there’s an opportunity to succeed in the markets, then easyMarkets doesn’t hold you back from doing so.
Brexit Referendum, 2016
Last year, could have been termed the ‘year of the crashes’. It’s almost difficult to pick just one event that rocked the markets. From Brexit, to Fat-Fingered trading, to the US election, geopolitical events shocked stock, commodity and currency markets. Those trading the sterling were in for a pounding after the 23 June Brexit referendum when the unexpected ‘Yes’ vote came in signaling the British public’s desire to exit from the Eurozone. By the morning of the 24th, the pound fell to 31-year lows against the US dollar, losing 10% against the greenback and 7% against the euro. This was the biggest drop experienced by any currency in a two-hour period in history. The FTSE 100 fell from 6338.10 to 5806.13 in just 10 minutes after opening and continued to swing up and down over the next two days. The ripple effect rolled out across the globe affecting all markets with the US DJIA losing 450 points (2.5%) in just 30 minutes.
Fortunes were definitely being made and lost that day in June. Here’s how easyMarkets protected their traders, once again: they had just released their most powerful and flexible risk management tool on their platform – dealCancellation®. This allowed traders to cancel losing deals up to an hour from opening and have their funds returned to their account. Not only, were traders able to take advantage of the guaranteed stop loss as a back stop, but they were even able to cancel their deals (even those that had triggered their stop loss), and have their money returned to them. When markets move in just minutes, dealCancellation gives traders plenty of time (60 minutes) to act. This feature includes a small cost based on recent volatility which pales in comparison to what the trader might have lost otherwise.
dealCancellation© Option is an ORE patent pending under the patent “Easy Cancellation Option” application number 62334455.