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Leverage reducing begins

  • #1
  • First Post: May 7, 2009 12:42am May 7, 2009 12:42am
Got that from CMS Forex today:

"Leverage*

In addition, the NFA will likely implement a regulation to reduce the maximum leverage that Forex firms can offer. In order to support the NFA's efforts, our US regulated FCM entity, will be preemptively lowering our maximum leverage on major pairs from 400:1 down to 100:1 on May 15, 2009. Having reviewed our clients' trading activity, we've noticed that the vast majority of clients' accounts used leverage does not exceed greater than 100:1. Currently, Forex brokers may offer up to 400:1 leverage, but what they are offering is actually the maximum leverage that you can trade with, or the minimum amount of margin required to maintain a position. A better representation of how leveraged your account actually is would be your used margin, or the size of your position(s) divided by the total amount of equity in your trading account. On average our clients' used leverage is only about 12:1, much less than the maximum leverage offered."
  • #2
  • May 7, 2009 12:59am May 7, 2009 12:59am
We need a lobbying group to fight our lobbying group.
The trend always ends.
  • #3
  • May 7, 2009 1:02am May 7, 2009 1:02am
how it lasted as long as it did is beyond me. 500:1 you got to be kidding lol.
  • #4
  • May 7, 2009 1:14am May 7, 2009 1:14am
It's about time!

Seems like NFA are on a serious mission to clean up the Wild West of currency trading!
  • #5
  • May 7, 2009 1:21am May 7, 2009 1:21am
100%


NFA and surprisingly CMS are moving to the right direction.

If you are leveraged more hten 100:1 stop trading and go to a casino.
  • #6
  • May 7, 2009 2:13am May 7, 2009 2:13am
come to think about it ... i sure hope someone creates another super-smart-agency to tell me how much (errr, how little) to wager on the roulette wheel, whether i should double down at black jack, throw money on the "come" at craps or push all-in at the poker table ...
"Believe nothing you hear and half of what you see." Proverb
  • #7
  • May 7, 2009 2:58am May 7, 2009 2:58am
hehhe thats funny

btw they already have an organization like that http://www.gamblersanonymous.org/mtgdirTOP.html



ehh in any case, for now i am staying with CMS
  • #8
  • May 7, 2009 3:13am May 7, 2009 3:13am
Quoting neshuti
btw they already have an organization like that http://www.gamblersanonymous.org/mtgdirTOP.html
not quite ... since it's not mandatory ... unless of course, ... you've been ordered to attend via a court order (ah, freedom ... aint it grand)
"Believe nothing you hear and half of what you see." Proverb
  • #9
  • May 7, 2009 3:47am May 7, 2009 3:47am
  • #10
  • May 7, 2009 4:38am May 7, 2009 4:38am
Quoting fxgrinder
come to think about it ... i sure hope someone creates another super-smart-agency to tell me how much (errr, how little) to wager on the roulette wheel, whether i should double down at black jack, throw money on the "come" at craps or push all-in at the poker table ...
I imagine there are a lot of destitute gamblers who lost everything by betting the farm who would agree with you!


http://i41.tinypic.com/2s6369i.jpg
  • #11
  • May 7, 2009 6:21am May 7, 2009 6:21am
all we need now is double the spread and slippage and
ALL the fun will be taken away
taking series 3 and 34
  • #12
  • May 7, 2009 6:48am May 7, 2009 6:48am
That sucks

Why can't they just let people make their own decisions and think for themselves. If people want to leverage their whole forex bankroll at 400:1, then that should be up to them.

I personally love leverage - the more the better (even though my broker of choice only offers 50:1). I want to have as little of my forex bankroll in my brokers account as possible. Much safer if you can leave the majority of your money in a large established bank than in your brokers account. In my opinion, they are increasing risk for the smart forex trader rather than decreasing it.
  • #13
  • May 7, 2009 10:14am May 7, 2009 10:14am
Quoting Agro
That sucks

Why can't they just let people make their own decisions and think for themselves. If people want to leverage their whole forex bankroll at 400:1, then that should be up to them.

I personally love leverage - the more the better (even though my broker of choice only offers 50:1). I want to have as little of my forex bankroll in my brokers account as possible. Much safer if you can leave the majority of your money in a large established bank than in your brokers account. In my opinion, they are increasing risk for the smart forex...
Yes, exactly. These are nanny state regulations. Why not have laws that regulate when you brush your teeth or how many vegetables you eat per day?

Where are the laws that require you to do X number of pushups or run X # of miles? How about a law that forces you to pay your credit card off every month?

I mean seriously .. this is hugely ****ed up.
  • #14
  • May 7, 2009 10:30am May 7, 2009 10:30am
very well put, but like the foreclosure crisis... you put too much trust into people and too much credit and they dont know how to handle it. they need the government to hold their hand and walk them accross the street ! i have high leverage but it doesnt mean i use it all ! i wouldnt mind 1,000:1 leverage ... it doesnt matter as long as your not stupid enough to cause damage to yourself with it. BOTTOM line is to keep the least amount of money in your forex broker as possible to minimize risk.


Quoting Agro
That sucks

Why can't they just let people make their own decisions and think for themselves. If people want to leverage their whole forex bankroll at 400:1, then that should be up to them.

I personally love leverage - the more the better (even though my broker of choice only offers 50:1). I want to have as little of my forex bankroll in my brokers account as possible. Much safer if you can leave the majority of your money in a large established bank than in your brokers account. In my opinion, they are increasing risk for the smart forex trader...
  • #15
  • May 7, 2009 10:37am May 7, 2009 10:37am
Quoting Agro
That sucks

Why can't they just let people make their own decisions and think for themselves. If people want to leverage their whole forex bankroll at 400:1, then that should be up to them.
I personally love leverage - the more the better (even though my broker of choice only offers 50:1). I want to have as little of my forex bankroll in my brokers account as possible. Much safer if you can leave the majority of your money in a large established bank than in your brokers account. In my opinion, they are increasing risk for the smart forex trader...
Well said, my friend. Those who are against high leverage of 400-1 dont know how to use the power of leverage in the first place. High leverage is a useful tool for traders that know how to use it. Unfortunately, it's the novice traders with small accounts that end up giving it all a bad reputation when they end up blowing all their cash.
  • #16
  • May 7, 2009 11:59am May 7, 2009 11:59am
Quoting mofuniverse
i wouldnt mind 1,000:1 leverage ...
Ok I'll take the bait, please just give me an example of how you would use 1000:1 leverage, seriously I'm interested. I promise not to shoot you down in flames, find fault, or laugh.
  • #17
  • May 7, 2009 12:14pm May 7, 2009 12:14pm
Quoting Tjpld
Got that from CMS Forex today:

"Leverage*

In addition, the NFA will likely implement a regulation to reduce the maximum leverage that Forex firms can offer. In order to support the NFA's efforts, our US regulated FCM entity, will be preemptively lowering our maximum leverage on major pairs from 400:1 down to 100:1 on May 15, 2009. Having reviewed our clients' trading activity, we've noticed that the vast majority of clients' accounts used leverage does not exceed greater than 100:1. Currently, Forex brokers may offer up to 400:1 leverage,...
Just use a non USA broker.
  • #18
  • May 7, 2009 12:29pm May 7, 2009 12:29pm
exactly the same way i would regardless of maximum margin available. but instead of needing to have 50:1 $2,000 to simply open a 100k position with 1000:1 i would only need $100 and can use that remaining $1,900 towards the position and have that 190 pips available towards the trade ! (notice i didnt give the total account size since that is irrelevant if you are trading responsibly)


Quoting pipmutt
Ok I'll take the bait, please just give me an example of how you would use 1000:1 leverage, seriously I'm interested. I promise not to shoot you down in flames, find fault, or laugh.
  • #19
  • May 7, 2009 12:37pm May 7, 2009 12:37pm
exactly right... surprising how sometimes something seems so obvious but you look at the other person or people and they are standing there scratching their heads ... leaving you to wonder if they can be so slow lol


Quoting PipStar
Well said, my friend. Those who are against high leverage of 400-1 dont know how to use the power of leverage in the first place. High leverage is a useful tool for traders that know how to use it. Unfortunately, it's the novice traders with small accounts that end up giving it all a bad reputation when they end up blowing all their cash.
  • #20
  • May 7, 2009 12:50pm May 7, 2009 12:50pm
Quoting mofuniverse
exactly the same way i would regardless of maximum margin available. but instead of needing to have 50:1 $2,000 to simply open a 100k position with 1000:1 i would only need $100 and can use that remaining $1,900 towards the position and have that 190 pips available towards the trade ! (notice i didnt give the total account size since that is irrelevant if you are trading responsibly)
Right, so having that much leverage available only changes your margin requirement, it's not changing your risk?

It hard to do the next bit and keep to my word, I'm not finding fault, honest!

Why would you need that additional free margin if risk isn't increased?

For example say you had $10k in your account and were an aggressive trader risking 5% per trade with a 50 pips stop. Like you say a 100k trade at 50:1 would be 2k margin, and $100 at 1000:1. Why do you need to have that additional free margin, there's plenty available for that trade and a few more.
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