In the face of sudden black swans, how should we deal with the risks in transactions?

Presumably traders are aware of various "black swan" events in the market. Due to the suddenness of the "black swan" event, it often has an unexpected impact on our transactions. Whether this effect is a surprise or a shock, it is talked about by traders. In this article, we analyze and correctly understand the "Black Swan" event from an objective perspective.

The "Black Swan" event has three distinct features.

One is rarity. A "black swan" event is usually an unexpected event without any expectation, that is to say, there is no evidence in the past that can determine its possibility.

The second is impact. "Black swan" events often bring about extreme market conditions, either flying down 3,000 feet to the limit, or soaring up to 90,000 miles to the limit.

The third is ex post predictability. Only after the "Black Swan" incident happened, people will look for clues to its appearance, and then find out the truth.

The most direct impact of the "black swan" event is the sudden change of the market trend, that is, the original market trend will end suddenly or accelerate suddenly without warning. This also corresponds to a saying often said in the trading market: When you think When you are sure, the market often hits you head-on.

Let’s give a few examples of “black swan” incidents, the most famous of which should be the Everbright Oolong Finger incident in 2013, as well as the previous European debt crisis and so on. Futures traders should be aware of a small "black swan" event in the futures market recently: On the night of November 1, both soybean meal and rapeseed meal went to the limit, only to find out afterwards that it was due to the high-level dialogue between China and the United States, and new developments in the Sino-US trade war emerged. The conclusion, and the price of agricultural products in China has always been closely related to the US market, so it will lead to extreme market prices.

Many futures traders, especially fundamental analysis and arbitrage investors, are particularly afraid of encountering "black swan" events, because "black swan" events that appear without warning often cause a devastating blow to the trading basis they rely on for survival. But this is something we cannot avoid. It fully demonstrates the random characteristics of the market and its "willful and naughty" character.

There are only two things we can do about this:

One is how to prevent the "black swan" incident and minimize the damage it brings. Undoubtedly, setting a stop loss in advance is a good cure.

The second is how to use the market chaos caused by the "black swan" event to expand their profits. Short-term follow-up is a high-risk and high-yield operation technique, but if you don’t understand this kind of market, it’s best to wait and see.

Regarding the "black swan" event, I especially want to say that because the "black swan" event is predictable after the event and the impact of extreme market conditions, many traders try to predict the next "black swan" event before it occurs Come out, become a rule, and even turn it into a basis for your own transactions. I think this is an extremely dangerous misunderstanding. I want to remind traders: For the "black swan" event, what we have to do is to follow the trend after it appears, not to predict when it will appear. I wonder if you have encountered a "black swan" incident that affects you? Welcome everyone to leave a message to share your experience!

There is no need to be too afraid of this kind of market. On the one hand, there is no need to be afraid of "black swan" events. Major "black swan" events are rare, and they are blessings, not disasters. Disasters cannot be avoided; don't think of "black swans" as disasters. On the other hand, after experiencing the "black swan", investors need to reflect, summarize successes and failures, and improve their ability to resist risks.