New NFA Regulations: The end of individual scalpers ?

Hello all,

I'm a lurker thus don't post often in forums but this time i would like get some opinions from skilled people.

According to all news trading regulations, consequences sound very bad especially concerning individual traders.
-NFA anti hedging rules, stop loss and limits orders suppression,
-FSA anti leverage rules in Japan and NFA anti leverage rules in USA right now,
-United Nations call for a new global currency to replace dollar.

I 'm worrying about the future for retail (individual) daytrader especially scalpers...

Their next logic step could be scalping suppression for individual traders and maybe reserve it for market makers.
I see thousands good reasons for them to forbid scalping soon, but can someone find a good reason for this kind of regulation never happens ?

I'm investing all my time for few months studying forex and trading (particularly scalping because it's adapted to my style and my capital).
I'm now starting to master a very good scalping tactic who seems working with ECN brokers, and i was projecting to do it as full time.

But according to all these new regulation and probably lot of others soon, doesn't it sound like a huge waste of time ?
Hope I'm completely wrong.

any thoughts welcome...

I'm also very concerned. I know that in US, there are probably no hedging anymore. Some brokers like FXCM have moved from US to UK to provide hedging.

My second and largest concern is that MetaTrader 5 not supporting hedging anymore http://forum.mql4.com/25821. If MT4 is discontinued then I need to find a new platform or stop forex trading completely.

oh, and i forgot, this dangerous traitor of Czarkozy is working hard on it too... and he is very powerful.

I don't care about hedging also because i don't belive in hedge as a useful thing, but damn if the leverage would be shut down.. this would be a very crazy thing, and it will be the end of trading. Anyway there will be always a broker that will offer good leverage, no matter if there will be needed to be registered in panama or in some crazy offshore place, leveraging will never die, and trading too.

So, take it easy..

but i think it should be a short term solution, because as we know, everything happens in USA happens in EU and often under worst forms.

maybe take a look to others market to scalp could be a good idea but the fistful of powerful decerebrated who lead our world has the grip on our business.

I never give up but this time it looks like the end.

Hope your right... ready for offshore place without problems, but when you see that some citizen from some countries can't open account with brokers from some others countries, will it be really possible? wait and see...

I know that in trading you have to never hope or pray, but this time...

where are you reading this??

site/address??

Minimum leverage I forecast will be 100... won't and can't go any lower then that.. people won't allow it, enough said..

Stop worrying

I'm new member and moderated then my answers take some times to be seen by other members. it's a mess to start new thread and answer in real time, sorry.

FSA Japan:
http://www.reuters.com/article/europ...13962920090731

for recall uk brokers are regulated by FSA too, scary isn't it ?

and you will find the rest in forexfactory's forum, but if NFA can reduce leverage to 100 today they can reduce it to 20 tomorrow, in reality they can do everything what's they want they are regulations organism, in others words "they are god" and can decide what is good and what is bad especially for us...

Never forget that the forex market is the biggest and best place for the big banks to make money. We all know how much money can be made, and so because of that there will always be a retail forex market somewhere, if not in the US then probably in Europe. Forget this new currency by the UN; they can't agree on what color the sky is today. Money and those who control it runs the world so there is no way forex will go away. Everyone is just barking right now at the US.

AHHHHHHHH....... THE SKY IS FALLING....... shut up and trade already

I will do very soon, thanx for the welcome

You had too much trust in the power of the trader...the NFA did not listen to them or the US brokers...

"On November 30, 2009, the NFA will implement amendments to the Financial Requirements Sections 11 and 12. This amendment will limit leverage to 100:1 for U.S. held accounts on the ten major currencies and 25:1 on all others."

First off guys you are over reacting. So the leverage goes down, big deal! Increase your lots. That's it. Problem solved. They are not going to shut down forex trading because there is too much money in it, hence too much taxes. The banks will not make as much money off of themselves so trust me, retail forex will not die. Seriously, this crap will pass at some point. Governments love controll but trust me, the more people that get pissed off, and the more the boiling point gets too high people will get pissed and complain and force things to change.

If you don't like the new rules, bitch to your representatives and then go offshore. Not all of the EU will agree on the same thing, plus there is always Switzerland. There is always a way to get around the rules legally. Adapt! That is a big part of profitable trading.

The NFA is the biggest scam man; didn’t they forbid limit and stop orders too?
All they want is to earn money. I agree with edrake, I don’t think traders have that much power over. There is always going to clients willing to accept those conditions, and as long as they have someone to sell that too, they don’t care about the rest.

LOL who do you think is in the pocket of any force with money?
Who do you think passed all the legislation to screw us all for the last 25 years? (Especially the last 9 years)
The political system is the CAUSE of all the strife because they are owned by anybody with a big enough 'contribution'.
They just say their 'script' for the cameras and the public, then continue on with thier agenda, which is to pass legislation that benefits thier contributors.

The problem is, the foolish public keeps re-electing the same crooks who screw us, and so they will always continue to screw us, and continue to be re-elected until the public smartens up. Don't hold your breath.

1. In recent past, the NASD for example created the $25k min account size for daytraders of stocks (to protect the common person supposedly, because they were getting destroyed in the markets)

2. As a former player of online poker for recreation, many FX companies advertise bonuses to deposits, much like poker used to.
Online poker barely exists in the U.S anymore, only like 2 companies still exist, and funding accounts is difficult because of the legal changes.

I think more regulation is coming to U.S. Forex. Hopefully, the "regulatory powers" are entertained with the poor economy and investment manager frauds long enough for me to make a couple million.

I agree with you 100%, especially on voting out incumbants. I'm not holding my breath either. I also agree and know all too well that the system bends to the biggest contributors and they certainly are not on the side of the average traders and investors. The government would rather have you put your money into a fund so other people can profit off your money and make you absolutely reliable on other people.

How are you gonna bitch to the representatives when it´s them (brokers) making profits out of all of these??
They don’t care to change things if they have more chances to earn money, and with the Fx law on their side!!!

I understand the concerns about government/NFA dominance and bullying, but I believe there are solutions to the issues that you raised.


1. The anti-hedge, no SL/TP, and FIFO rules

All hedges, SLs, and TPs do is effectively adjust the net position (long or short). The answer to all of this is one or more EAs that sit between the trader and MT4/MT5. The trader enters all of his usual trades (entry point, SL point, TP point, pos size) into an external database that's automatically maintained by the software. (Additionally, the orders could be specified as conditional, e.g. only enter a trade if another trade is already open, and/or cancel a pending trade if another trade has already opened (aka OCO). And the EA could have other nice features, e.g. calculate position size based on % risk entered, etc). The software would then calculate the net position at each relevant point, and automatically adjust the net position according to FIFO rules, while the trader gets on with the rest of his life. Thus the pre-NFA-ruling conditions are effectively retained in their entirety, and the software operates with complete transparency; no special expertise is required by the trader.

What about existing EAs? Well, the software would include plug-ins, so that instead of executing an OrderSend, OrderModify or OrderClose command, the EA is modified to call the appropriate module in the plug-in that adjusts the position sizes as I described previously.

The entrepreneur who develops and sells this piece of software will likely become an overnight millionaire. One person's problem is always another person's opportunity.

BTW, all of this illustrates just how superficial the NFA rulings are. Nothing has really changed.


2. Leverage: calculate how much leverage you actually need

Let's say that I risk 2% of my account per trade, employ (on average) 50 pip SLs, and want to trade full lots ($100,000 positions). For xxxUSD pairs that's $10 won/lost per pip.

OK, so my risk per trade = $10 per pip x 50 pips = $500. For that risk to be 2%, I would need an account size of 500 / 0.02 = $25,000. Hence the leverage required is $100,000 / $25,000 = 4:1.

Of course all of this assumes that I only have one trade open at any one time. By opening multiple trades, my total exposure will exceed 2%. Leverage of 25:1 (see post #12) would potentially allow up to 6 simultaneous trades @ 2% risk each.

The ratios are the same for any account and position sizes, assuming 2% risk and an average SL of 50 pips. Perform your own calculations, based on your trading parameters. For more info on how the calculations work, see my post here.

I can't see why a trader (who takes risk management seriously) would need leverage exceeding 25:1.


3. New global currency

If/when this occurs, the nature of the market will of course change, but as long as there is still a market to trade, there will always be opportunities for the skilled, adaptable trader to profit. The principles that underlie technical and fundamental analysis, entries and exits, risk management, etc will never change.


Just my 2 pips worth.

Hi hanover,

..but let's assume I don't want to put all my trading money in my brokers account (afraid of the broker goin' insolvent or whatever), but rather at my stronger insured home bank. I think that's legitimate and I'm not the only one thinking this way.
I could & would still calculate risk using my whole trading money, but the free margin would be too low sometime (related to the broker-offered leverage and the bucks I have on that account). Might not be such of a problem if I possess 1million or so, but..

Do you have any hint for that problem?
Well 1:100 or 1:50 should work, but depending on how many I take off my brokers account, 1:25 won't.


Also, another thing:
I'm a bit afraid, too.
e.g. the habits of the EU to control "things" is vast, I would bet there are influential people & lobbies who are looking forward to dive into what we can see in the US and Japan currently.
And I also wouldn't be surprised if not the big banks and players suffer most of established rules, but the insignificant private traders..(btw what is our lobby? do we have sth comparable to a lobby? it's FF, isn't it?

btw:
What would be the alternatives to spot forex market for a small trader like me, do you have good suggestions?
..In terms of liquidity and access to the data and comparable platforms..
Well, I mean access to markets that behave similar to what I do know currently (which is, well, basically spot fx)..


Regards, Lowen