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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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Seems like this used to happen a lot more often than it does now. I suspect the root cause is an extra zero in the order size, buy 500 becomes buy 5000 for example! Smaller (say 10 tick) sweeps are still common in some commodities. I believe there are algo's that try to take advantage of this, by always having orders X ticks off market.
In a situation like this I want my position to be closed out as soon as possible. According to the cme product reference sheet for CL, the protection functionality would have placed a limit order 25t below my initial stop level. What if price doesn't go back to that level? I think this is downright dangerous and quite worrying, up till now I had the security knowing that in an extreme price event my position would be closed out at whatever price, but now I know that's not true.
The standard broker response in these cases is that, if the market keeps going in one direction because of unforeseen events there may be a limit up/down scenario and trading would be halted.
I asked around other traders that have traded CL longer than me and they have never experienced an event of this magnitude so I must conclude it is something relatively rare.
The other thing to consider is, after such a sweep there should be a tendency for many to want to exit their positions, offsetting at least part of the initial sweep. This is in fact what happened on the 14th and the market bounced back and then some, but this of course is not guaranteed.
I've been trading CL for 5 years and yes moves like this are very rare, I feel like they used to be more common a few years back. And yes the price does normally move back into the liquidity vacuum that's been created. I got out as soon as I could for a 42t loss, but if I just let my position run it would have been only 25t - however my game isn't to play price gaps, or play to limit losses resulting from one, and if i was in the same position again I'd probably do the same.
I always just like to know what my worst case Armaggeddon type scenario loss could be. From the cme page the limit up/down price is currently 600t away from the previous days settle, so this leaves a big window of exposure open if the price continues in one direction.
Doesn't seem like there is anything I can do about it apart from rest in the knowledge that these events are extremely rare and hope if am in the next time, I'm on the right side of it
If you watch that video, you will see that there were no buy orders whatsoever for 46 ticks, which means a big order must have swept through that many levels.