Introduction
Murphy’s law says that if something can go wrong, it will sooner or later. Because we work systematically and probabilistically correct, that even the most improbable event will occur at some point. In order to prevent the most improbable thing from becoming a nightmare, ASA Trading Software has been built up in a way, that takes every scenario into account that we have deemed improbable.
How do we take the improbable into account?
We know that e.g. disasters come ongoing on the stockmarket. In the last twenty years, we have had one in 1999-2002, 2007-2009 and a bigger fall in 2015. These falls on more than 50% are inevitable. We also see flash crashes over a few minutes. The last one was in 2016 with the british pound in october. They are very unpleasant and have cost a lot of people a fortune.
When you invest in a stock, the risk is in principle 100%, because there will always be a chance that a company goes bankrupt. When you invest in a stock index, you risk will not be a 100% because that would be the equivalent to all companies going bankrupt. However, the risk is still more than 70%.
Bigger falls can be fool proofed by parting the curve in intervals. In the event only allow one trade pr interval, it can be calculated how much you need in your account in case of a fall of e.g. 90% amongst all companies.
It is actually much worse concerning Flash crash. One of the worst cases was when the Swiss franc (CHF) was released across from the euro (EUR). Again, there is only one way to fool proof against such a fall. Only have a few open trades in regards to your balance.
Correlation analysis can minimize the general risk, however, it will also take a hit in the case of CHF.
ASA Trading Software is not immune for these instances, but the loss is always in control. Software will be selling ongoing in order to keep the risk down. Furthermore, we are keeping very strict tabs on the intervals, so any negative fluctuations only will give a temporary unrealized loss, much like investing in stocks.
When a Flash crash takes place, lengthy trades are taken into account by only being able to open a new trade once every four hours. Which means, that if the improbable should happen, and the stock market falls 40% over night, we will only have one extra trade open. So a unrealized loss is lesser.
ASA Trading Software also trades on the background of news, in this part we are only in the market for a few minutes to an hour. Thereby holding the amount of open trades down to a controlled amount.
We can not foresee the unpleasant situations, but we can come through them with limited damages.
Quite another thing is the technical. You can get hacked. We can lose our connection to the server. These things have also been taken into account. Even though the instructions come from the cloud, the system has been instructed to which parameters needs to be instated when the connection is gone.
Because everything is controlled mathematically, we even know exactly how the system will react. So if there is suspicious activity on a customer's account, we will be notified immediately.
We have people sitting in Denmark and Bangkok. Thereby having 24/7 human coverage.
Basically we have a plan for everything we have predefined as a risk, but of course there is always the probability of a scenario we have not thought about.
