How are “freak trades” handled?

How are “freak trades” handled?

Freak trades can cause sudden and extreme price spikes or drops in a stock or contract—but they typically last for just a moment. If you see a large, unexpected loss in your position momentarily, it could be due to a freak trade.

What is a freak trade?

A freak trade is a rare but sudden trade that occurs far outside the expected price range—usually because of low liquidity, a wide bid-ask spread, or an order placement error. These are short-lived and not reflective of the actual market value.

Exchange policies (high level)

Handling of such trades is governed by the respective exchanges’ rules. Participants can review market depth and the exchange trade log for clarity on prints and price formation. Any review or action related to trade prints follows the exchanges’ published policies.

Will we square off your position?

Will we square off your position?

We will not square off<\/strong> your position due to a freak trade.

  • These trades occur instantly and typically self-correct in seconds.
  • Unrealized losses may appear briefly on your screen, but they generally reverse once the price stabilizes.
  • RMS (Risk Management System) only intervenes when margin requirements are genuinely breached over time—not because of temporary price anomalies.

User protections (good practices)

  • Use limit orders to control execution prices, especially in thin/illiquid contracts.
  • Place stop-loss with limit protection if you are concerned about one-tick spikes.
  • Avoid large market orders in low-volume instruments with wide spreads.

What if…

ScenarioExplanation
I see a large unrealized loss due to a freak tradeThis is typically momentary. The P&L will adjust once the price normalizes.
My stop-loss gets triggered due to a freak priceIf a stop-loss was placed near the freak price, it may execute. Use limit protection if needed.
I’m concerned about price accuracyYou can verify the price movement in market depth or check the exchange trade log for clarity.

Tip: To reduce exposure to freak prints, prefer limit orders and avoid large market orders in illiquid contracts.

Last updated: 28 Jun 2025

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