Breaking: ESMA finalizes new rules to govern leveraged trading

Lots of confusion in this matter.. For all intents and purposes, our leverage in the future will be 1:20. No need to talk about 1:30 because it will apply only to a few instruments.

"(a) 3,33% of the notional value of the CFD when the underlying currency pair is composed of any two of the following currencies: US dollar, Euro, Japanese yen, Pound sterling, Canadian dollar or Swiss franc;"

https://www.esma.europa.eu/sites/def...ry_options.pdf

Thanks -

Re above post and included below - looks like LMAX support need to go over their homework.

3.33% = 100/3.33 = 1:30, 5% = 100/5 = 1:20, etc., etc

(a) 3,33% of the notional value of the CFD when the underlying currency pair is composed of any two of the following currencies: US dollar, Euro, Japanese yen, Pound sterling, Canadian dollar or Swiss franc;

(b) 5% of the notional value of the CFD when the underlying index, currency pair or commodity is: (i) any of the following equity indices: Financial Times Stock Exchange 100 (FTSE 100); Cotation Assistée en Continu 40 (CAC 40); Deutsche Bourse AG German Stock Index 30 (DAX30); Dow Jones Industrial Average (DJIA); Standard & Poors 500 (S&P 500); NASDAQ Composite Index (NASDAQ), NASDAQ 100 Index (NASDAQ 100); Nikkei Index (Nikkei 225); Standard & Poors / Australian Securities Exchange 200 (ASX 200); EURO STOXX 50 Index (EURO STOXX 50); (ii) a currency pair composed of at least one currency that is not listed in point (a) above; or (iii) gold

(c) 10% of the notional value of the CFD when the underlying commodity or equity index is a commodity or any equity index other than those listed in point (b) above;

(d) 50% of the notional value of the CFD when the underlying is a cryptocurrency; or

(e) 20% of the notional value of the CFD when the underlying is a share, or is not otherwise listed above.

The thread contains links to lists of AU and NZ regulated brokers.

Having posted said links its not my job to play policeman. However, some observations -

Brokers listing liquidity sources and direct to the point information appear qualitative.

Some laced with pretentious glamorized images of supposedly cool sophisticated successful traders - the gullible will be impressed.

In brief: One broker with much of the above claims to have 3 x faster execution* than competitors. No reference to metrics, studies or bonafides test can be found to back this and other claims. No listed liquidity sources.

Some give the impression of a Joe and his wallaby enterprise.

A few high end brokers.

Due diligence required ! !

* Sample example - ↓

AU Broker claim - vague, undetailed Follow Up ?? If any, so well hidden it's impossible to find.

UK Broker claim - defined Follow Up - Up Front, Direct, LOUD and CLEAR -
A very worthy AU Broker advertises compensation up 5,000 USD as member of The Financial Commission's Compensation Fund Policy

However - - though, still better than zero. (broker's copy appears to quote EUR as USD)
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Note: We have no referral or promotion connection to to or agreements with above commercial content. Post content is purely informational for personal reference purpose. We hold no prejudices towards Australia.

So how many lotz can you trade with 30:1 leverega on a 1000 dollar account....It will not impact me because i am working with ic markets and they are in australia and said too me that they will not have to follow esma...IC markets the only broker too use when scalping 0-0.6 spread 0-0.1 on majors and 0-0.6 on gbp/jpy all the pairs i need and they take 7 dollars a lot for opening trade cheaper is impossible

see post 49

It is very easy to calculate.

1 lot = $100,000

If you wish to trade $100,000 with 30x leverage, you will require 100,000 / 30 = $3333.33~

Keep in mind your broker will have a "close out" percentage of their own when your account gets too low, probably around 33% so you may need to add that to the calculation.

If you have a $1,000 account; you will be able to trade $1000 x 30 (leverage) = $30,000; which is 0.3 lots.

EURUSD - Current Margins *
EUR/USD 1:30 1.0 Lot = 3,921 USD
EUR/USD 1:30 0.3 Lot = 3,921 USD x 0.3 = 1,176.30 USD.

Balance = 1,000 USD
Margin at 0.3 lots = 1,176.30 USD

Go figure !

* Dukascopy quotes a standard lot in 0.1 mio (mil) -> 0.1 x 1,000,000 = 100,000 units = 1 Lot.
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Note: We have no referral or promotion connection to or agreements with above commercial content. Post content is purely informational.

Yep, got the heads up from IG earlier this week, that it all starts on 1st August for the instruments I trade.

I've just opened an account with IC Markets and plan on spending the next 8 weeks getting used to the platform so that I'm good to go come August.

Pretty gutted that it's come to this but hey ho, just one of those times to buckle up and adapt to the changes.

All the best to you all, hope this doesn't affect your trading too much.

Hi K....,

I have some good news!

I want to advise you that as of yesterday, Admiral Markets Australia is now officially allowed to onboard European residents including the UK.

I have attached instructions to apply for a new Traders Room through Australia (Make sure you select "Australia" in the country list drop-down menu).

Once logged into your Traders Room. You should then be able to go through the online application via the open "Open a Real Account" option as per below. For foreign clients, you will need upload in your Traders Room (or email myself) the following verification documents:

 

1. Clear copy/photo of your valid Passport photo page
2. Proof of Address document (e.g .Bank statement, utilities Bill etc.) showing your name and registered address. Please ensure its dated within last 3 months.
   
   Note: Screenshots and partial copies will not be accepted

If you have any questions, please let me know by reply email.


Regards
-------------------------------------------------
Comment phylo:
The above and other emails were test email to determine if brokers regulated in UK and AU were accepting UK citizens/residents for AU accounts.
Other brokers with dual UK and AU regulation may soon follow accordingly .

Hey SAM68 how far its been long just want to know if theres any other new development on your VTrading System thats a real profit maker of a system please dont let it fade out. Rgds

A clearer reality is in view and we have had time to reassess, remodel, recalculate, reprogram etc., etc.

As a member of a family consortium - agreement between father and sons - we collectively hold a number of accounts.

As far as ESMA is concerned and remaining UK or Offshore based, of necessity we will be batting for both sides. It is what it is - pros and cons - cold unemotional logic dictates adapt, strategies and move on.

For accounts requiring FSCS protection we do not find 1:30 draconian and negative balance protection is further incentive not to move funds offshore.

For one or two accounts not requiring FSCS protection and 1:30 restrictive AU & NZ brokers listing liquidity sources are preferred selections.

Success

By Dukascopy :

" Dukascopy Bank will keep leverage up to 1:200 & binaries.

ESMA's recent restrictions imposed upon brokers of the European Union (EU) raised many questions.
Dukascopy Bank is regulated by the Swiss Financial Market Supervisory Authority FINMA and applies the highest standards of transparency and integrity.
Since Dukascopy Bank is in Switzerland, which is not a member state of the EU, it will not apply ESMA restrictions (neither on leverage, nor on binary options or others).
ESMA restrictions will concern only Dukascopy Bank's European subsidiary − Dukascopy Europe, which will be fully compliant with new European regulations.
6 June 2018. "

Thanks for your message Slingshots1
VTrading is always incorporated in all my trading I believe it is a strong reversal pattern that we must keep looking at
But there is little to add really , only to place daily alerts
take care bro,

So I guess it seems like the general advice is to move to another broker that is not in an EU member state vs simply put up more margin?

I think you will find in the fine print it will cover both. Have a look at this. What they want to control is the leverage of the market.
Since the invention of trading on personal computers without the nee to go through the banks . They have been trying to find ways of reverting back to the old days to boost their profit and control over the money system.
https://www.babypips.com/news/forex-cfd-20140924

https://www.esma.europa.eu/press-new...ive-products-0
Have a read. Spot Fx is included .

Case: Trader requires FSCS protection on all accounts and expectations of minimum 50% annual return on individual accounts.

Current saving rates - Time period = 1 year.

1. Easy-access savings: allows withdrawals
   1. Bank of Cyprus UK – 1.3%
   2. Shawbrook Bank – 1.3%
   3. Sainsbury's Bank – 1.3%

2. Savings via your bank account
   1. Nationwide – 5% up to £2,500 for 12mths
   2. Tesco Bank – 3% up to £3,000

3. Fixed-rate bonds: must lock cash away
   1. New. Atom Bank – 2.05% for 1 year
   2. New. Atom Bank – 2.15% for 2 years
   3. New. Atom Bank – 2.3% for 3 years
   4. Vanquis Bank – 2.66% for 5 year

   source: https://www.moneysavingexpert.com/sa...-best-interest
   

The below example table proposes:

1. minimum 50% annual return on investments over a period of 39 weeks (3 quarters).
2. margin 1:30
3. 2% (1.98) risk against initial free margin
4. minimum average weekly profit of 300 points (30pips) over 39 weeks.
5. Hard SL of 350 points.

The following considerations are taken into account.

1. Note: 300 points TP is not max targeted TP against a 350 points SL but the minimum average weekly point profit required to realize an annual gain of 50% over 39 weeks.
2. Calculations do not include unknown factors of slippage or know factors of broker commission but are accommodated and compensated for the purpose of modeling by wider SL.
3. Calculations require periodic updating of exchange rate which may require small -/+ adjustment to weekly target points.
4. The table is an adjusting approximation which is considered sufficiently within acceptable limits over the long term.

Table: Blue cells are inputs and all remaining cell should update automatically on input at a blue cell.

Some checks against calculations

Cell D17: Margin £9,805.65 - 3.35 lots - 1:30
FXPro Calculator *: Margin £980.6567 @ 335,00 units @ 1:300 therefore £9,806.57 @ 1:30 (slight difference of margin calculation due to a few hours between exchange rates)
* No 1:30 selection so 1:300 used and multiplied up x 10.

C17: 1 Point Value per lot - £0.6775
Tickmill Calculator: 1 Pip Value per lot - £6.77 therefore 1 pip = 10 points -> 1 point value = 6.77/10 = 0.677

Table Keys: Row 17

Lots: 3.35
Point Value/lot: £0.67705 (1/1.47700)
Margin: £9,805.65 (3.35 x £2,927.06) 1:30
SL Points: 350 points
SL -£: £793.84 (3.35 x 0.67705 x 350)
Min P(rofit) Points: 300 (min average weekly points required to realize annual 50% profit)
Com: Commission - blank
Min Profit - £: 680.43 (3.35 x 0.67705 x 300) Min average weekly profit required to realize annual 50% profit) -> £680.43 x 39 = £26,536.77 against £50,000 deposit = +50% gain.
Balance: £50,000.
Free Margin: £40,194.35 (50,000 - 9,805.65)
SL Risk: 50.63 (Free Margin/SL-£ = 40,194.35/793.84 = 50.63 and is 1.98% risk against Free Margin) Note: Not against Balance because margin is excluded in risk calculation. Margin is considered non tradable and deceiving to include in risk calculation. Its fine in books but not logical for practical trading.

Chart considerations - 1

1. Trader needs a minimum weekly 300 points profit to meet targets.
2. Current EURJPY daily volatility is +90 pips or +900 points - https://uk.investing.com/tools/forex...ity-calculator

Chart Consideratios - 2

1. The 350 SL allocation is merely a measure and does not have to be used to full on a failed trade. The below image illustrates an entry with a potential SL of 170 point. Of the 350 points allocated 180 points remain.
2. At maximum SL expenditure of 350 points per week if every trade failed it would take 50 weeks to loose all free margin and be left with 100% margin.
3. At maximum SL expenditure of 700 points per week if every trade failed it would take 25 weeks to loose all free margin and be left with 100% margin.
4. There is ruthlessly no excuse for an account to be squandered away to anywhere near 100% margin.

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We have no referral or promotion connection to or agreements with above commercial content. Post content is purely informational.

Chart Consideration - 3

1. Trader realizes markets can become untradable and not every day or week is guaranteed tradable.
2. The trader is confident of extracting a minimum average of 300 weekly points profit from a 900 point daily volatility over a period of 39 weeks. (300 x 39 = 11,700 points - > 3.35 x 0.67705 x 11,700 = £26,536.97 against £50,000 deposit = +50% gain (£0.20 rounding error against above £26,536.77 calculation))
3. If target of 11,700 points (50% ROI) is achieved before 39 weeks trader has option to continue trading full 39 weeks with expectations of additional profits.
4. If target of 11.700 points (50% ROI) is not achieved by 39 weeks trader has option of trading into remaining 13 weeks (4th Quarter) with expectations of achieving target or withdrawing from trading.
5. Trader realizes ruthless adherence to a maximum weekly SL expenditure, determined in accordance with trader competence, is vital to survival and protection of investment.

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Charts: British Summer Time (BST) GMT+1 - world time converter - https://www.worldtimebuddy.com
Thick horizontal gray bar: weekly open.
Horizontal grid lines: 350 points apart.

2018-June-14 // PD: -1.470 = 1,470 points TD: Time Difference

Attached Image (click to enlarge)

2018-June-4~8 // 780 points, 1,150 points

Attached Image (click to enlarge)

2018-May-28~1-June // 2,830 points, 1,825 points

Attached Image (click to enlarge)

2018-May-21~25 // 2,170 points

Attached Image (click to enlarge)

2018-MAy-14~18 // 1,270 points, 535 points

Attached Image (click to enlarge)

All accounts are equal, but some accounts are more equal than others - anon, Orwellian satire

(George Orwell, Animal Farm - 'All animals are equal, but some animals....')

Concluding Considerations

Calculations referenced against preceding posts.

1:30: The below 2% risk is calculated against free margin (balance - total margin) and not balance inclusive of margin.

1. Depletion of total free margin = £40,195.35
2. Remaining 100% margin = £9,805.65
3. Deposit Balance = £50,000 (1. + 2.)
4. SL Points: 350
5. SL-£: 793.84

1. At maximum SL expenditure of 350 points per week if every trade failed it would take 50 weeks (40,194.35/793.84) to loose all free margin and be left with 100% margin.
2. At maximum SL expenditure of 700 points per week if every trade failed it would take 25 weeks (40,194.35/1,587.68) to loose all free margin and be left with 100% margin.

1:300: The below 2% risk is calculated against free margin (balance - total margin) and not balance inclusive of margin.

1. Depletion of total free margin = £40,195.35
2. Remaining 100% margin = £980.565
3. Deposit Balance = £41,175.915 (1. + 2.)
4. SL Points: 350
5. SL-£: 793.84

1. At maximum SL expenditure of 350 points per week if every trade failed it would take 50 weeks to loose all free margin and be left with 100% margin.
2. At maximum SL expenditure of 700 points per week if every trade failed it would take 25 weeks to loose all free margin and be left with 100% margin.

Observation: In both 1:30 & 1:300 cases depleted-lost free margin = £40,194.35. Therefore 1:30 & 1:300 have exact equal losses. The difference being that 1:30 has remaining 100 % margin = £9,805.65 and 1:300 has remaining 100% margin = £980.565.

Between a Rock and a Hard Place: For accounts requiring UK FSCS broker insolvency protecting 1:30 is an inescapable option - an offer than cannot be refused.

The Positive: As presented in preceding posts, a competent and ruthless disciplined trader, with objectives beyond a hobby account, should be able to fare favourably relative to limitations with the additional bonus of negative balance protection - which is sought not for purposes of blown margins but under the assumption (yet to be confirmed - will get there when gotten there) that negative balance protection includes black swan events.

Risk Calculation Illusion:

If 2% risk is calculated against balance inclusive of margin the 2% risk is an illusion* - the following applies.

*Great for writers of trading books and Harry Potter but deceptive applied to practical trading.

The result of any number divided by 50 is 2%. (x/200 → 0.5%, x/100 → 1%, x/50 → 2%, x/30 → 3.33%, x/25 → 4%)

£50,000/50 = £1,000. -> 1,000/50,000 x 100 = 2%.

1. At maximum SL expenditure of 350 points per week if every trade failed it would take 37.6 weeks (£37,657.81/£1,000) to loose all free margin and be left with 100% margin. (the illusion is risk is assumed as 50,000/1,000 and is, in fact, a 12.4 *(50-37.6) week shortfall) *almost a full Financial Quarter.
2. At maximum SL expenditure of 700 points per week if every trade failed it would take 18.5 weeks (£37,657.81/£2,000) to loose all free margin and be left with 100% margin. (the illusion is risk is assumed as 50,000/2,000 and is, in fact, a 6.5 (25-18.5) week shortfall)

Lots: 4.22
Point Value/lot: £0.67705 (1/1.47700)
Margin: £12,352.19 (4.22 x £2,927.06) 1:30
SL Points: 350 points
SL -£: £1,000.00285 (4.22 x 0.67705 x 350)
Deposit Balance: £50,000.
Free Margin: £37,647.81(50,000 - 12,352.19)
SL Risk: (no longer valid and an illusion) 50, 2% (SL-£/Balance = £1,000.00/£50,000.00 = 2% )