Black Swan events are the unlikely chance that an extreme event may happen that causes the market to crash or spike suddenly. For example, the 2008 GFC, the September 11 terrorist attacks, the 2000 tech bubble and burst, unexpected or globally shocking announcements, there is no way of completely combating Black Swan events, no matter what investment you’re in. As we’ve mentioned in a previous video, we try to diversify our trading as much as possible by trading multiple currency pairs with multiple different strategies, so it’s less likely for them all to move in an adverse direction at once. When there’s a large spike or dip, losing trades may be offset by winning trades.
Further to this, we only use a small percentage size risk for each trade relative to most traders. So in the event that a Black Swan does happen, we do not have large single exposure in one direction with one currency pair.