Proposal to phase out Hedging | Forex Factory

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Proposal to phase out Hedging

  • #1
  • First Post: Dec 16, 2008 7:36am Dec 16, 2008 7:36am
I absolutely do not agree with this crap. It is absolute nonsense.

http://www.nfa.futures.org/news/PDF/...Adj_112408.pdf
  • #2
  • Dec 16, 2008 8:18am Dec 16, 2008 8:18am
While I do understand their reasoning, I don't agree w/ it. They should let the customers be damn fools and "shoot their eye out" if they want too.

Compliance Rule 2-43(b): Offsetting Transactions

The other trading practice NFA believes must be addressed involves a
strategy that FDMs refer to as “hedging,” where customers take long and short positions
in the same currency pair in the same account. NFA is concerned that customers
employing this strategy do not understand either the lack of economic benefit or the
financial costs involved.
In trading, there is no bullshit. You either make money or you don't.
  • #3
  • Dec 16, 2008 8:47am Dec 16, 2008 8:47am
Well if this comes to pass I definately will be considering brokers outside the US.

Hedging is a risk that we are willing to take, it should not forced out of our hands. I think the NFA are going a little too far now.
  • #4
  • Dec 16, 2008 9:00am Dec 16, 2008 9:00am
All you guys who Grid trade, correct if I am wrong but wouldn't this have some serious implications for you guys?
  • #5
  • Dec 16, 2008 9:23am Dec 16, 2008 9:23am
This is so much like a regulatory body in action (NFA proposal to CFTC)
whereby a reasonable amendment proposal, Rule 2-43(a) Price Adjustments
that has atleast some merrit and the intention of less shafting of the customer
by the FDMs after a trade has been executed and then a price is changed,
is paired with utter ridiculous nonsense, Rule 2-43(b) Offsetting Transactions,
whereby the proposed amendment would actually do nothing to help either
the client nor the bucketshop and naturally takes some money away from the broker
because hedging would be disallowed.

Ultimately, this is bad because the brokers will want to make up the lost $$ somehow
and customers will get these costs passed back to them in someway even less favorable.

This is how Washington often works. Kick 'em in the ass so they forget about their migraine headache.
  • #6
  • Dec 16, 2008 10:13am Dec 16, 2008 10:13am
  •  onu
  • | Joined Feb 2006 | Status: superior senior member | 746 Posts
hopefuly 30% close their acc with USA brokers and move elsewhere.
UK and Australia are the better choise regards safety of customer money.
  • #7
  • Dec 16, 2008 10:18am Dec 16, 2008 10:18am
  •  onu
  • | Joined Feb 2006 | Status: superior senior member | 746 Posts
Quoting Kinsy
All you guys who Grid trade, correct if I am wrong but wouldn't this have some serious implications for you guys?
exactely, these successful trading systems cost the broker seriously money and thats the reason for this new BS of the NFA. Dont forget, NFA is in the hand of the few big USA brokers.
  • #8
  • Dec 16, 2008 10:36am Dec 16, 2008 10:36am
Just finished reading the whole PDF and it was interesting. Basically, you would need two accounts in order to continue with a hedge strategy. NFA is basically looking at it like "saving traders from themselves" and I think that its a good idea.
  • #9
  • Dec 16, 2008 11:12am Dec 16, 2008 11:12am
What's the problem? These appear to be beneficial changes for the retail trader, at least on the surface. There is no benefit in hedging. The FIFO system is exactly the same as hedging, just the way it is presented in your account is different and you will not get charged or margin called for effectively being flat in the market.

Answer this: If you are long 3 lots on EURUSD and simultaneously short 2 lots on EURUSD, what is the traders total net position in the market?

A. 5 lots
B. 1 lot
  • #10
  • Dec 16, 2008 11:22am Dec 16, 2008 11:22am
Quoting birdt
What's the problem? These appear to be beneficial changes for the retail trader, at least on the surface. There is no benefit in hedging. The FIFO system is exactly the same as hedging, just the way it is presented in your account is different and you will not get charged or margin called for effectively being flat in the market.

Answer this: If you are long 3 lots on EURUSD and simultaneously short 2 lots on EURUSD, what is the traders total net position in the market?

A. 5 lots
B. 1 lot

Are you serious with your question? How do you become a Senior Member anyways, with a dumb question like that you should be demoted to Small Bus Member. If anyone does not know the answer to your question then they should not be trading and if they dont know why this rule is a good thing then once again they should not be trading. Stop wasting our time!
  • #11
  • Dec 16, 2008 11:40am Dec 16, 2008 11:40am
No actually i dont agree with fxtrader42, it doesnt make sense at all the only one who gains from it, is the broker by charging you the spread twice
  • #12
  • Dec 16, 2008 12:44pm Dec 16, 2008 12:44pm
Seasons greetings to you too fxtrader42. You sound aggro there kid. Another losing day huh?
  • #13
  • Dec 16, 2008 12:47pm Dec 16, 2008 12:47pm
Quoting Kiado
No actually i dont agree with fxtrader42, it doesnt make sense at all the only one who gains from it, is the broker by charging you the spread twice
Kiado,

That is why the rule would be a good thing...so what you are saying is you do agree with me.
  • #14
  • Dec 16, 2008 12:49pm Dec 16, 2008 12:49pm
Quoting birdt
Seasons greetings to you too fxtrader42. You sound aggro there kid. Another losing day huh?
Havent placed one trade to day which is why i am letting you waste my time. The only thing that has aggrevated me today was shooting a 79 with a double bogey on 12 and 16. Plus your lousy question.

Happy holidays
  • #15
  • Dec 16, 2008 1:07pm Dec 16, 2008 1:07pm
Quoting fxtrader42
Kiado,

That is why the rule would be a good thing...so what you are saying is you do agree with me.
Yes the rule is a good thing so then i agree with you
  • #16
  • Dec 16, 2008 2:26pm Dec 16, 2008 2:26pm
It's never a good thing when a government (or it's proxy) dictates to it's citizens how to conduct their personal affairs. Consider a moment if the NFA disallowed scalping or carry trades or >insert your own favorite<. Don't try to claim hedging is any different. Everyone has their own styles and techniques to trading. If someone wants to develop a grid strategy involving flat positioning, more power to him!

Another way to look at it. The clowns who got the US economy in it's current mess are now trying to tell you how to handle your money. Pfyeah. I'm sure gonna want to take their trading advice.
  • #17
  • Dec 16, 2008 4:01pm Dec 16, 2008 4:01pm
  •  onu
  • | Joined Feb 2006 | Status: superior senior member | 746 Posts
Quoting opie999
It's never a good thing when a government (or it's proxy) dictates to it's citizens how to conduct their personal affairs. Consider a moment if the NFA disallowed scalping or carry trades or >insert your own favorite<. Don't try to claim hedging is any different. Everyone has their own styles and techniques to trading. If someone wants to develop a grid strategy involving flat positioning, more power to him!

Another way to look at it. The clowns who got the US economy in it's current mess are now trying to tell you how to handle...
great post
  • #18
  • Dec 16, 2008 5:01pm Dec 16, 2008 5:01pm
Quoting opie999
It's never a good thing when a government (or it's proxy) dictates to it's citizens how to conduct their personal affairs. Consider a moment if the NFA disallowed scalping or carry trades or >insert your own favorite<. Don't try to claim hedging is any different. Everyone has their own styles and techniques to trading. If someone wants to develop a grid strategy involving flat positioning, more power to him!

Another way to look at it. The clowns who got the US economy in it's current mess are now trying to tell you how to handle...
"Hedging" isn't a trading technique, it's an accounting practice. You can take your "hedging" strategies and execute the same trades using FIFO accounting and you will get the same results or better.

I'm not in favour of extra regulation, but you can see why regulators would have their sights on this rather clever scam.
  • #19
  • Dec 16, 2008 7:31pm Dec 16, 2008 7:31pm
<sarcasm>I heard NFA is proposing a 6 months no withdrawal rule.

Accounts are not allowed withdrawal until 3 months after the last position is closed.

ie, if you have closed a position on Dec 16, you can only make withdrawal sometime in March 16.</sarcasm>

NFA is bullshit.
  • #20
  • Dec 16, 2008 7:52pm Dec 16, 2008 7:52pm
  •  onu
  • | Joined Feb 2006 | Status: superior senior member | 746 Posts
Quoting BurgerKing
<sarcasm>I heard NFA is proposing a 6 months no withdrawal rule.

Accounts are not allowed withdrawal until 3 months after the last position is closed.

ie, if you have closed a position on Dec 16, you can only make withdrawal sometime in March 16.</sarcasm>

NFA is bullshit.

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