French trader Harouna Traoré accidentally made $10 million, the usual suspect is "fat fingers" again.
What is "Fat Finger"?
These are errors that occur as a result of pressing incorrect keys on the keyboard due to various reasons such as carelessness, absent-mindedness or fatigue.
Although "Fat Finger" errors are generally harmless, they can sometimes cause significant volatility in the markets. For example, if an investor places an order to sell 1,000 shares of Apple stock and accidentally enters a sell order of 1,000,000 shares, this order may be matched by all buy orders in the market, causing sudden price declines.
Brokerage firms use various preventive methods to prevent such errors. Let's look at a few chubby finger mistakes together.
1️⃣ 7 Million Barrels of Crude Oil
Steve Perkins, who had too much alcohol at his company's golf event, started doing some transactions on his laptop at home.
Over the next 24 hours it ordered seven million barrels of crude oil for around £345 million. This amount corresponded to approximately 69% of the global oil trade at that time and left the employer with a rather large bill.
Perkins was banned from trading by the FSA for five years and enrolled in an alcohol rehabilitation programme.
2️⃣ Flash Crash: May 6, 2010
The Dow Jones index, one of the important indicators of the US financial markets, witnessed a record drop of 998.50 points.
Stock prices, which fell rapidly in a short period of seconds, and the indices that included these stocks, recovered in a short time and returned to their normal levels.
An investor was thought to have entered an incorrect order worth billions of dollars.
However, as a result of the investigations, the FBI and Commodity Futures Trading Commission (CFTC) determined that the flash crash occurred when a high-frequency trading algorithm issued incorrect sell orders.
3️⃣ Accidental Profit of 10 Million
It is very rare for a chubby finger mistake to work out in a trader's favor.
However, this seems to have happened just recently. Novice French trader Harouna Traoré first suffered a loss of 1 million euros in the transaction he took and thought he accepted the loss and closed the transaction. He managed to make a profit of 10 million dollars by trading European and US stock futures in an account he did not realize was active.
However, the story does not have a happy ending for Traoré. Valbury Capital – declared that he had breached the contract, that his profit-making transactions were therefore invalid and that his transactions would be cancelled.
Traoré is suing Valbury for profits he claims are rightfully his.
✅ Result
One fat finger mistake and you can deal a big blow to your investments.
Protecting yourself from these types of errors is actually quite simple. First of all, never, ever take action after consuming alcohol. When you are experiencing physical or emotional fatigue, turn off the screen and rest.
Institutions also take preventive measures so that you do not make the mistake of having a chubby finger. Actions such as maximum transaction limit and two-step transaction confirmation are examples of some of these.
Inner voice: I sometimes do this while preparing content. I confuse the numbers a lot😂
Sources I used while preparing this content: "Traderlife" and "Investopeida".
Thank you for reading 🙏
