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Could 10:1 be the new leverage in US Forex?

  • #41
  • Jan 14, 2010 2:13am Jan 14, 2010 2:13am
Quoting GulfCoastPip
So what if they want to use 400:1, 100:1 or 1:1. If not FX it's Powerball, Monday Night Football, Poker with the guys, strippers, etc...!

It's not the "GUVs" responsibility to protect people from themselves. If anything stop the stupid ones from breeding!
Y to go to vegas , lets give example from Wall St , what about options contracts why they dont put limits , any trader can bet all-in in any 1 put or call trade (if there is volume )and he can lose his entire wallet on 1 trade ...
  • #42
  • Jan 14, 2010 2:17am Jan 14, 2010 2:17am
Quoting tar
Y to go to vegas , lets give example from Wall St , what about options contracts why they dont put limits , any trader can bet all-in in any 1 put or call trade (if there is volume )and he can lose his entire wallet on 1 trade ...
FX has gained popularity over the last few years so it's on the radar.
  • #43
  • Jan 14, 2010 2:43am Jan 14, 2010 2:43am
Quoting GulfCoastPip
FX has gained popularity over the last few years so it's on the radar.
Retail FX volumes are down. The "regulations" are there to protect the brokers. Lowering the leverage allowed for the retail trader will mean that the retail accounts will grow in size. There might be fewer of them, but the shakeout will be in the $100 account ranks.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #44
  • Jan 14, 2010 2:51am Jan 14, 2010 2:51am
I agree with most of what you said, but I don't believe Mr. Smith that funded his account with $300 will now pony up $10,000. He'll try and go to an overseas broker. Either that or he'll throw dice in the alley next to the liquor store.

I also believe that those that would've normally funded their account with $100,000 will now fund their account with $50,000 or less.

I might be wrong, I might be right, but in the end it really doesn't matter. The GUVs gonna do what the GUV wants to do. They'll do it with our input or not.

By the way, if you read the doc, I think it mentioned "Consumer Protection".

Quoting The Fool
Retail FX volumes are down. The "regulations" are there to protect the brokers. Lowering the leverage allowed for the retail trader will mean that the retail accounts will grow in size. There might be fewer of them, but the shakeout will be in the $100 account ranks.
  • #45
  • Jan 14, 2010 3:02am Jan 14, 2010 3:02am
Quoting GulfCoastPip
By the way, if you read the doc, I think it mentioned "Consumer Protection".
Sure. Except we don't have a "government". We have a consortium of various industry & monied interest representatives and their paid spokesmen who are also known as your congressmen. This is what produces the noises and documents that excrete from Washington D.C. If you are a mere citizen then well you best find a vested interest to ally yourself with. Otherwise you're SOL.

In this case, "Consumer Protection" is a high-sounding euphemism that actually refers to the protective measures the syndicate is intent on taking in order to insure that its members can continue to comfortably consume your money.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #46
  • Jan 14, 2010 3:03am Jan 14, 2010 3:03am
Quoting The Fool
Sure. Except we don't have a "government". We have a consortium of various industry & monied interest representatives and their paid spokesmen who are also known as your congressmen. This is what produces the noises and documents that excrete from Washington D.C....
well said.
  • #47
  • Edited 3:21am Jan 14, 2010 3:09am | Edited 3:21am
Quoting tar
U said it yourself "If u know what you are doing " , i agree if u know what u r doing and u dont gamble by risking too much and u know how to trade then u use 100:1 broker thats ok but 95% seems dont know whats going on ...

Assuming for a moment that 95% is correct, so what? If you don't know what you are doing you're going to lose anyway. You'll just lose more slowly with lower leverage. Is it better to lose more slowly, or better not to lose at all? If the answer is not to lose at all, then leverage isn't a problem.

If draconian restrictions are placed on leverage traders large and small will be taking their business overseas.
  • #48
  • Jan 14, 2010 3:23am Jan 14, 2010 3:23am
Quoting Lionstrike
Is it better to lose more slowly, or better not to lose at all? If the answer is not to lose at all, then leverage isn't a problem.

If this type of legislation is enacted traders large and small will be taking their business overseas.
I actually think its better for a loser to lose quickly and catastrophically - then he will more likely quit & move on.

The banksters will probably get some "regulations" in force to tax the shit out of the revenue from your "foreign investments" if you move your retail trading accounts overseas....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #49
  • Jan 14, 2010 3:32am Jan 14, 2010 3:32am
Quoting Lionstrike
Assuming for a moment that 95% is correct, so what? If you don't know what you are doing you're going to lose anyway. You'll just lose more slowly with lower leverage. Is it better to lose more slowly, or better not to lose at all? If the answer is not to lose at all, then leverage isn't a problem.

If draconian restrictions are placed on leverage traders large and small will be taking their business overseas.
With lower leverage it will be very slow yeah ( both gains and losses ) but revenge trading will not be available , survivors rate will increase ... lets put it in other words ( misuse of leverage is a big factor in this high rates of failure between retail traders ) ...
  • #50
  • Edited 8:12am Jan 14, 2010 8:07am | Edited 8:12am
Amount of leverage will have no effect whatsoever on how fast you blow up your account, you can still max out whatever leverage they give you. You will simply have more money in your account when you blow up cause of the high margin requirement....for example ... instead of having 1,000 left in your account after you blow up , now you will have 2,000 after account blow up . No affect on how fast you lose it. Only affect is you will WIN slower..... if you have deep pockets it wont affect you much but if you are just starting out and have just realized how to trade profitably you cannot become rich as quick. "rich stay rich poor stay poor"
  • #51
  • Jan 14, 2010 8:17am Jan 14, 2010 8:17am
You'll need a bigger capital to trade and when your favorite broker goes under, your monies are not protected. Talk about a "lose,lose" situation!
  • #52
  • Jan 14, 2010 8:31am Jan 14, 2010 8:31am
I suggest someone from Forex Factory's team could write comments to CFTC. From a business point, a lower leverage will do not help FF gain further popularity considering the competition from other established trading forums.

50:1 is the bottom line haha
  • #53
  • Jan 14, 2010 8:36am Jan 14, 2010 8:36am
This has already been discussed, infact.. FINRA suggested something ridiculous like 1:1.. and in fact, they realized it would be very bad for the retail forex community, and it would end retail forex in the United States.

Don't sweat it guys.. just wait until they get their public comment that they seek.!
lowest draw down possible please.
  • #54
  • Jan 14, 2010 8:39am Jan 14, 2010 8:39am
I believe that Forex will always be a high-leverage instrument simply because of its yearly percentage moves in relation to other markets with lower leverage.

Take for example the stock market - a move of 15-20% can happen a few times per quarter while on the forex market, a percentage 1-2% (roughly 100-200 pips for the main pairs) can be a massive daily move. Also, since the forex market lacks a directional bias (unlike the stock market), high leverage is needed to scrape a profit out of moves.

For the forex market to be "marketable" as an investment vehicle, high leverage is needed.
  • #55
  • Jan 14, 2010 8:49am Jan 14, 2010 8:49am
Quoting mofuniverse
Amount of leverage will have no effect whatsoever on how fast you blow up your account, you can still max out whatever leverage they give you. You will simply have more money in your account when you blow up cause of the high margin requirement....for example ... instead of having 1,000 left in your account after you blow up , now you will have 2,000 after account blow up . No affect on how fast you lose it. Only affect is you will WIN slower..... if you have deep pockets it wont affect you much but if you are just starting out and have just realized...

Leverage simply allows you to open up a larger position than you normally would've been able to. So if you have a $1000 account, with 100:1 leverage, you could irresponsibly open up a position of 100,000 units compared to 10:1 leverage the max position size you could open would be 10,000 units. So if you utilized the 100:1 leverage your wins & losses would be 10x what they'd be with 10:1 leverage.

In a nutshell...that's leverage.
  • #56
  • Jan 14, 2010 8:55am Jan 14, 2010 8:55am
If I am not wrong, last year FINRA proposed a similar rule regarding to limit retail forex leverage and also soliciting public comments. The feedback is sure overwhelming in accord: against the rule.

here is the link http://www.finra.org/Industry/Regula...s/2009/P117744
also some links in FF: http://www.forexfactory.com/sitesear...htype=site&=Go

The point is CFTC more stubborn or bureautic than FINRA? (after all FINRA is just a self-regulated orgnization) No one knows.
  • #57
  • Jan 14, 2010 8:58am Jan 14, 2010 8:58am
I also suggest everyone here send this thread link to their brokers, asking them to do the thing immediately.
  • #58
  • Jan 14, 2010 9:03am Jan 14, 2010 9:03am
Exactly ... in both of your examples you are maxed out (cant even open a trade actually) as soon as those positions are opened you get a margin call so in your example the accounts get blown up JUST THE SAME as both are at max leverage.... all it means is like i said you will need more money to have sitting there idle for margin. if you have a million $ account i guess you can still trade responsibly but if you are small time trying to get up there, your out of luck because you dont even have enough money for margin or barely enough to open up a micro lot at .10 cents a pip..... basically what they are saying is that people are too stupid to think for themselves


Quoting GulfCoastPip
Leverage simply allows you to open up a larger position than you normally would've been able to. So if you have a $1000 account, with 100:1 leverage, you could irresponsibly open up a position of 100,000 units compared to 10:1 leverage the max position size you could open would be 10,000 units. So if you utilized the 100:1 leverage your wins & losses would be 10x what they'd be with 10:1 leverage.

In a nutshell...that's leverage.
  • #59
  • Jan 14, 2010 9:07am Jan 14, 2010 9:07am
Quoting Zkf
I also suggest everyone here send this thread link to their brokers, asking them to do the thing immediately.
This is a very good idea. Lets get on it people!
  • #60
  • Edited 9:39am Jan 14, 2010 9:31am | Edited 9:39am
Quote
Originally Posted by Zkf
I also suggest everyone here send this thread link to their brokers, asking them to do the thing immediately.

Quoting 24HourTrader
This is a very good idea. Lets get on it people!
While brokers will undoubtedly be making a public response, if you feel strongly about the proposal, you will make a greater impact by contacting the CFTC directly outlining your position either for or against the proposal as Lionstrike did in his post.

(Added Comment)

Comments should be sent to [email protected]. Include “Regulation of Retail Forex” in the subject line of the message.

Your message will be posted unchanged on cftc website.

FXCM is opposed to the 10:1 leverage and is actively lobbying against it.

-Jason
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