Rotating Image Header

Currency Pair GBPUSD “Frozen!” – During NFP Data

Friday was NFP day – the most hectic day for the forex market. Before the bulk of the accounts were added to the PAMM, Nigel [the trader] tried to buy 25 lots of GBP/USD (a.k.a. “cable” or “pound”) at 1.9093 after the release of the initial NFP figures that were bearish for the US Dollar. After clicking “Buy,” nothing happened, which was strange. He then proceeded to press Cancel just in case. Again, nothing happened. A few seconds after that, cable stayed “mysteriously frozen” at 1.9083 BID by 1.9090 ASK for around two minutes. During this time, all of the currencies that trade against the US dollar started moving around 10 to 20 pips in a direction equivalent with USD weakness (e.g., EURUSD moved up from around 1.2770 to around 1.2790). Less than a minute later, when the revised numbers from the prior month were released, the prices turned around and began approximately a 2-minute bullish USD move (from 8:30 AM to 8:32 AM EST); that is, a move in the other direction.

I was tracking Nigel’s trading on the trading platform since the NFP release and found it odd that he did not open any positions despite the strong market move. I watched as the EURUSD quickly, but progressively, dropped during the two-minute down move – while the GBPUSD remained frozen at 1.9083 BID by 1.9090 ASK. Still no position.

All of the sudden, the GBPUSD reemerges from its mysterious slumber at 1.9030! Still no position.

Over 20 seconds after GBPUSD starts moving again…abracadabra…a 25-lot cable position appears! What?!?!?! That’s not the end of it though. Guess what the price of execution was? 1.9093! Net result? A position down over 60 pips! – way beyond the tight 8-pip stop loss that’s used in this program – wiping out half the gains that had been generated so far in the live test account.

I thought to myself, “This has to be a mistake!”

When Nigel exited this “freak trade” (# 57474), it delivered a -$14,250.00 blow to the PAMM. Ouch!!! (don’t worry, your account was not in the PAMM when this occurred – so I won’t be sending you a bill anytime soon; I just want to entertain you a bit). Even though Nigel was able to make back half the loss during the same day after this incident, I emailed FXLQ to let them know what happened and sent them a link to the video.

Not having the patience to wait for a reply, I called FXLQ and spoke to James, who said he was going to look into it.

On Tuesday, James informed me that the trade was valid because MT4 “froze up” and the market gapped down after the NFP numbers.

I explained to him that this didn’t make sense, since cable didn’t gap on any of the other price feeds that we track simultaneously. I also told him that if cable gapped, some other pairs would have gapped down too. This didn’t happen. In fact, if you observe the price for EURUSD on the MarketWatch window of the video, it dropped gradually throughout this whole ordeal – giving traders ample time to exit trades. I added that what happened to the pound did not seem like a gap. It just seemed as if the prices stopped coming in and it stayed “frozen” at the same value. James claimed that this wasn’t the case and that the execution was valid, despite the fact that it was reported by MT4 minutes after it occurred.

Even though I’m not happy with the situation, it seems that we might have to “take it on the chin.” We haven’t stopped day trading because of this, but we have definitely slowed down increasing the size per trade until we feel a bit more comfortable with the executions.

Will we eventually be able to execute 100 lots ($10M) at a time on this system? I don’t know. Let’s see what happens next week.

NOTE: We received some reassuring news regarding this “frozen trade” issue on Saturday 11/11/06 from FXLQ. See the 11/11/06 entry for more information.