Chinese Circuit Breaker to Halt Panic, Halted to Halt Panic

January 8, 2016

Chinese Circuit Breaker to Halt Panic, Halted to Halt Panic:
Yes, you read that headline correctly. Amazing scenes.

This beauty from FT correspondent Patrick McGee popped up in my social media stream this morning and it was too good not to publish:

As of today, the Chinese will suspend their relatively new stock market circuit breaker mechanism which is designed to halt panic selling and stop prices from falling too hard, too fast.

When the stock market experienced a 5% fall, a ‘pause’ in trading was implemented. In theory this was a good idea, but in the reality of the volatile Chinese stock market, all the pause did was give traders time to get their sell orders ready to go. By the the time trading had re-opened, it never took long to hit the -7% circuit breaker and suspend trading for the day.

In today’s world of algo trading, I think that circuit breakers are more relevant than ever. You have to give the humans time to re-consider panic selling, but 7% swings aren’t uncommon in the Chinese markets and the levels definitely need some tweaking.


Chart of the Day:
With all the uncertainty around stocks and currencies to begin the year, the quiet achiever has been GOLD.

GOLD Hourly:
Commodities chart, GOLD Hourly, 160108
Click on chart to see a larger view.

It’s an after the fact chart I know, but I had to share the perfect breakout and re-test of previous resistance as support. I know that some of you are on board the move, so leave a comment below or mention @VantageFX on Twitter letting us know where you got in and why?


On the Calendar Friday:
AUD Retail Sales m/m

CAD Employment Change
CAD Unemployment Rate
USD Average Hourly Earnings m/m
USD Non-Farm Employment Change
USD Unemployment Rate

Do you see opportunity trading Forex? Take a look at the Vantage FX MT4 MetaTrader 4 platform and instantly access your free $50,000 Forex demo account.

Dane Williams – @VantageFX

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