Back in September '14, I was attempting to determine which Z system to run live. My candidates were Z1, Z2 and Z5 (I considered Z12 also, but Sundance seemed to be having problems with it (thread "One Year Z12 live"), but it seems to be ok now, if I read the thread correctly). Anyway, the major issue with Z5 (as I understand it), seemed to be lack of volatility in the pairs traded (or in the CHF, not sure which), so much so, that many posters reported no trades being entered at all. So Zorro 1.26 came along, addressing this issue. I still had my doubts, and went with Z1. It's been up and down since 9/14, but currently running at a profit (due in large part to shorting the USDCHF pair).

I guess a question to be asked is, what have we learned re: Z4/Z5, in light of the SNB de-capping ? (btw, I see Z4/Z5 are no longer listed in the manual). For one, I think we were all expecting some type of "soft landing" if the SNB decided to remove the cap. We expected to be given enough time to shut our systems down, or at least have our orders stopped out. But with everyone trying to close their positions at the same time, many suffered huge losses.

The upshot is, I don't think we planned for the unexpected. No one's fault, really. Just a fact of life.

I had also expected that they would remove the cap in a different situation, with the EUR well above 1.20. There had been several opportunities last year.

The SNB tought us 3 lessons: Expect the unexpected, do not trust a stop loss, and distribute your systems among several brokers.

I think that a very important difference between z5 and the others is that z5 was "backed by the Swiss National Bank" - as the documentation said.

In other words this was speculation based on facts of the outer (economic) world while z1-z3 do technical trading as I know.

The environment can change at any time but when nobody really knows why a strategy is working - I think this is mostly the case with the working strategies - then nobody can break the rule in a second.

So I think that Zorro developers made a mistake when they stated that z4 and z5 were safer.

And we also made a mistake because none of us found the problem. If you read the Zorro tutorial it should be very clear that a working strategy is not one which is "backed by the Swiss National Bank".

But a very important difference is that we have paid for z5 while the Zorro team made it for money and they said implicitly with the documentation (this is also true for z1-z3 in present): You only have to run it without knowing anything about the markets and the money will come. Trust me, I know what I am talking about.

For me, the risk was explained clear enough. It's obvious, that all positions turn negative if the price falls under 1.20. I didn't expect that such a big event would happen in seconds, but it doesn't come as a big surprise to me.

The learning here is to find a way to capitalise on moves like this. Limiting damage is the first step, second is how do we create a system to capture these moves. That was a missed opportunity. If I were to re-write Z5 in hindsight I would make it cut all longs and get short below 1.20. There were still fills at 1.19, so the stops didn't come into affect until below that level. Once it is trading below 1.20, chances are the level is gone.

Yea, I hear you. But I think for something like the SNB de-capping, you were either on the right side of the event before hand, or you were not. It's difficult to predict (in my opinion) before hand what to do, or take some action during the event, since it's so instantaneous. You can hedge against the event, but then, you're holding a position in anticipation of (by definition) an improbable event, so you might incur pain while holding. Anyway, if you were short USDCHF, EURCHF, ect, before the decapping, you made money. If you were long, you got creamed.

Probably the best way to protect yourself in a similar situation is with options. Most would expire unexercised, consider it like the costs of an insurance policy, but with similar black swan type events it could keep you in the game.

I did not have any nor am I an expert on options/option pricing, so please don't ask me to elaborate. I'm not live with sufficient funds to justify at minute so my reasearch is not done, but when I trade for a living or have high 5 to 6 figures, I most definitely will calculate my exposure in the market and insure vs black swans with options.