USDCHF Unpegged

A different kind of intervention…

Yesterday there was an extraordinary event when the Swiss National Bank decided to remove the Swiss Franc peg to the Euro. This was vastly different from your standard government intervention and took the market completely by surprise.

Previously I have only seen extreme price moves like this in the back-tester and never had the opportunity to witness it first hand. There was some very significant observations worth mentioning…

Irreversible price changes
…. at least in the short term. EUR/CHF and USD/CHF dropped over 1000 pips in minutes. It is very unlikely in the short term that the prices will retrace.

Indicative pricing and trading blocked
If you look at the volume indicator in the screenshot above, you’ll see there was 4 minutes where no volume was recorded. This is because there was no volume – liquidity dried up, prices went indicative, and no one could trade.

Volatility across the board
Spreads went wild across the board. I heard reports of spreads ranging in the hundreds of pips for other brokers.

So much for stop orders
Given the craziness of what happened in those few minutes, I can’t imagine that stop orders would have been very effective without some kind of insane slippage – that’s if you were lucky enough to have them execute before the prices went stale.

….

These kind of events are just a reminder as to why you should never over-leverage yourself. Don’t risk too much in your trading, you should always expect these unexpected events!

If anyone has any other interesting observations, please let me know! Thank you.

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