"You naturally notice frightening things" (Nikkei BP Publications, "Factfulness")

Overcoming 10 delusions and developing the habit of seeing the world correctly based on data

is a subtitle taken from the best-selling book "Factfulness" from a few years ago.

I think many readers may have read it.

“You notice the things that are terrifying naturally. You realize that fear and danger are not the same. Everyone fears ‘physical harm,’ ‘detention,’ and ‘poison,’ but that leads to an overestimation of risk. To curb the fear instinct, you must calculate risk correctly.”

Risk is considered as danger level × frequency.

The idea that fear distorts human judgment was written there.

Related to trading, I thought about the concept of margin calls and how to view them.

When I hear “margin call,” I recall the Swiss franc shock.

Below is a brief overview.

“On January 15, 2015, due to a change in Swiss monetary policy, the Swiss franc surged within minutes. In about 20 minutes, EUR/CHF plummeted from around 1.20 to about 0.85, which translates to the dollar/yen moving from 120 to nearly 85.”

I was working, but my FX trader friend who trades full-time called me

and said excitedly, “Look at the Swiss franc chart!”

The chart showed a tremendous drop, with prices moving little and the chart freezing.

Perhaps ticks weren’t being streamed (sweat).

Stop-loss and take-profit orders may not have filled for some people.

It was panic. It was terrifying.

I also heard that margin calls occurred, so many people must have gone bankrupt.

The broker OOJAPAN (AlOOJAPAN) collapsed because of this, I recall.

Since then, I thought scary things happen... and

I switched to OOFX, which uses a zero-cut system.

However, when I read Factfulness, it says to think in terms of danger × frequency.

Indeed, danger is like triple-A, but the frequency is at a level of once every ten years...

Perhaps I too had made hasty judgments due to vague fear?

I thought like that.

The possibility is almost zero, I suppose...

Even so... after all...

I want to avoid margin calls, of course (laugh).

See you next time.

Protect your EA from spread risk!