NFA Meddling with Broker Leverage

Hello everyone,

The NFA is meddling with broker leverage requirements - which have DIRECT impact on all individual traders, retail or institutional. The proposal would be to limit leverage to 100:1 on majors and 25:1 on minors. Following is a link to their report: http://www.nfa.futures.org/news/PDF/...Notc021909.pdf

If you would like to send Mr. Stawick at the CFTC comments with regards to this proposal, you can send an email to [email protected]. Reference "Proposed amendments to NFA Financial Requirements Section 12 and the Interpretive Notice regarding Forex Transactions"

stockwet

Nope, wouldn't effect me, or the majority of traders on this forum. Perhaps those trading the super low time frames who can afford to use stops of less than 10 pips might use leverage of greater than 25:1, but the ability to trade volume 25 times greater than their account balance is more than enough for most.

I'm not sure of the stats but it is not illogical to surmise that there is a positive correlation between degree of leverage and incidence of blown up accounts. Newbs need protecting. 700:1 leverage is ridiculous, yet they put it out there like it is a selling point. It doesn't matter if you have a 'positive expectancy', if you trade with that leverage you're going to get iced sooner rather than later.

birdt, you know as well as I do that the NFA is really just run by the brokers and every piece of regulation they put forward is to attack all the professional traders hedging and making money using 1000:1 leverage PROFITABLE EVERY SINGLE DAY!11



I didn't think many good brokers offered over 100:1 leverage anyways, but hey you know someone will be crying about their rights as traders to use whatever leverage they want.

Wow,

I think that you guys are really short-sighted. First of all, I'm an experienced trader, as many on this forum will attest, so, I'm not speaking with ignorance here.

Second, I wouldn't at all agree with your statement that most of the traders on this forum are not trading with more than 100:1 leverage. Many certainly are and many are trading minors at more than 25:1 leverage.

Finally, you are assuming that those of us who are experienced traders are leveraging ALL of our money in our brokerage accounts. This just isn't the case and if any trader worth his gumption isn't using the leverage as a free credit facility and keeping the rest of his trading funds in cash, then, he hasn't thought through the benefits of compound interest. Further, I wouldn't dare risk all of my trading funds in an unsecured Forex brokerage account, which is another reason why I use the leverage provided and keep the rest in cash.

stockwet

I have been trading for a while, and after finding a style which really suits my personality, I am now trading profitably. My style is not important to this thread except to say that I require 200:1 or greater. Recent changes now make it difficult for me to maintain the same level of performance.

The new NFA rule on leverage and margin have changed that. And their change made it tempting to look at an account with a broker outside the US.

However, as I was checking into the possibility of using a non-US broker, I came across some information I was not previously aware of. Two brokers responded that the US government recently established a new law affecting US citizens who reside within the US--these laws may make it very difficult to have a trading account or an investment account with a broker operating in a country outside the US. If you make inquiry with Alpari UK or with the Swiss broker, Mandus Invest--the response you will receive is very interesting. Alpari, UK posts their requirements on their website--I don't meet any of the categories they describe, and I'm guessing they describe those categories to accomodate the law.

You may even come to feel, as I do, that you are being held captive between the NFA and the US government. A non-resident US citizen is less regulated in this area than is a US citizen residing in the US.

NFA's new regulation took effect December 1st, and it does 2 things. It standardizes Margin calculations so that all NFA member brokers are now required to calculate margin in the same way. Second, it establishes maximum leverage at 100:1.

I don't know yet what the new US law is that affects US citizens residing in the US, and I don't know how long it has been in affect. I have asked my accountant about ii--he attended a course which included the general application of the new law, but he had no clients he was aware of at the time who are affected by it, so he could offer no help now.

I have tried during December to trade under the new rules using 3 brokers, all of whom are reputable, and all of whom are either NFA members or are in the process of becoming an NFA member. My results during December, while good, are significantly less than what they had been previously. More importantly, the new NFA rules have had a very negative affect on my confidence.

If you have knowledge of the new US law affecting US citizens residing in the US and who wish to trade or invest in firms located outside the US, or if you work with an accountant who can advise me in this matter, I would appreciate your comments.

I use 200:1 max. but my SL is less than 30 most of the time and i dont use time frames at all. but I don't like the NFA

the Not.Fun.Anymore Group!

Now I wish 100:1 was the cap!!! Soon they will be taking it to 10:1 - you saw it right - I said 10:1. Retail forex in the US will soon be dead. I've always wanted to live in Ireland or Australia anyway, then I can tell the NFA to crawl back into the sewer hole they spawned from and leave me alone!