do hedge funds trade leveraged forex?

do hedge funds play with 1:50 or 1:100 with forex? im just curious why forex allows such high leverage compared to futures contract and stock market's 1:2....this ridiculously high amount of leverage can add signficant or drawdown to poor performing hedge funds.

I think with some sleight of hand with funds, you can actually get up to 1:4 on stock leverage, and futures leverage is much more than 1:2... it's typically somewhere between 1:10 and 1:50, depending on the commodity and broker you're dealing with.

There are probably a couple reasons why leverage is so high with Forex: one is that it is virtually impossible that a currency will ever go to zero* or infinity against another currency, because currencies are always traded in pairs, whereas stocks and commodities are never traded directly against each other, and the chance that the countries behind the currencies will completely collapse is small**; another reason is probably the way central banks can create nine times as much new money as they issue debt (even the central banks have a 1:9 "margin").

As for hedge funds, since they have millions of dollars at their disposal, they typically don't use the entire leverage, unless they were spreading it out over several currency pairs. Most of the institutional traders never use more than 1:5 leverage on foreign currencies.


* Just think of the value of stocks of disgraced companies right after the bad news came out: Refco, New Century Financial, Enron, WorldCom, just about any bankrupt dot-com, etc.

** Notice that almost all the brokers that offer exotic crosses (ie: USD or EUR vs. some 2nd world country) cut the leverage for those pairs in half.

so potentially, this killer leverage available for retail traders...can either bankrupt ppl or make ridiculously large returns.


then WHERE ARE THE AVERAGE JOE FOREX TRADER MILLILONAIRES???!!

so potentially, this killer leverage available for retail traders...can either bankrupt ppl or make ridiculously large returns.


then WHERE ARE THE AVERAGE JOE FOREX TRADER MILLILONAIRES???!! like u never see or read about them anywhere. compared to futures or stock traders they are on the magazines....even if its a 70 year old guy making 10 million dollars from stocks with just 100,000k.