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

  • #421
  • Jan 30, 2010 3:52pm Jan 30, 2010 3:52pm
Whenever looking at any new proposal, one needs to ask the question... who stands to gain the most from this?

While some fx business would go off-shore, would a good portion of fx traders simply take the path of least resistance.... revert to the US domestic currency futures and options markets where leverage is better? Depends on how difficult it would be for traders to open off-shore accounts. Traders like to trade, the paperwork to facilitate that (and the taxation declaration requirements for off-shore accounts) is a pain in the rump.... maybe that's a hurdle some traders would rather avoid if they have other (easier) alternatives at their disposal.

Does make you wonder about the NFA's hand in all of this. Am sure the Retail FX industry lawyers are busy compiling argument, especially on the anti-competition front. That will be a fascinating read when their comment papers are uploaded to the cftc's comments file.
  • #422
  • Jan 30, 2010 4:14pm Jan 30, 2010 4:14pm
Quoting Jade Gate
Whenever looking at any new proposal, one needs to ask the question... who stands to gain the most from this?

While some fx business would go off-shore, would a good portion of fx traders simply take the path of least resistance.... revert to the US domestic currency futures and options markets where leverage is better? Depends on how difficult it would be for traders to open off-shore accounts. Traders like to trade, the paperwork to facilitate that (and the taxation declaration requirements for off-shore accounts) is a pain in the rump.... maybe...
I opened an account with FXCM UK last fall when the anti-hedge and FIFO restrictions were pending.

It was extremely easy. I have not been to my accountant yet with this change but no one at the brokerage asked any questions or suggested that the "offshore" status would have troublesome implications. Maybe that's because the UK account is a branch of an American brokerage. In any case, I wouldn't let that stop me now. Just get on a "live chat" and ask to be able to chat with a new accounts rep for this issue. I don't think there is much fuss to it. However, this discussion is probably moot since, supposedly on April 1, CFTC is going to commence to bullying foreign brokerages with all of this and they will probably stop having US customers altogether.
Scarlett
  • #423
  • Jan 30, 2010 4:47pm Jan 30, 2010 4:47pm
Quoting Scarlett
supposedly on April 1, CFTC is going to commence to bullying foreign brokerages with all of this and they will probably stop having US customers altogether.
That of course, is the worry for traders and brokers alike. The CFTC has an "International" department, one of such functions is to

"assists foreign regulators in inter-jurisdictional issues involving the U.S."

http://cftc.gov/international/index.htm
  • #424
  • Edited Jan 31, 2010 6:14am Jan 30, 2010 6:13pm | Edited Jan 31, 2010 6:14am
It would be useful to have some quantitative numbers on the distribution of retail traders' use of leverage. How many traders use 100:1, how many use 50:1, how many use 25:1, how many use 10:1 or less. What precisely is the dollar value of those accounts? Does the use of leverage change over time as the trader gains more knowledge and experience. If so, how does that change?

The hypthesis (from brokers) is that 90% of business would go off-shore. Does that mean that 90% of traders regularly use leverage in excess of 10:1? Is that factual?

The leverage question is a hot potato, including for analysts/educators. Much is made of using low leverage but perhaps the brokers see the other side of what traders actually do. Is the use of high leverage much more widespread than it seems? Do traders actually use a lot of leverage or is it just that they want the freedom to have that choice in the right circumstances? Is Retail Forex primarily a vehicle for speculative investors/traders who have other sources of regular income? Some evidence-based statistical analysis would be helpful. Difficult have a debate or indeed a major policy shift in a vacuum of factual information.
  • #425
  • Jan 31, 2010 9:15am Jan 31, 2010 9:15am
10:1 is actually perfect, that way :
1) you have 'enough' leverage to profit
2) you won't be tempted to be a pig and gamble 500:1 and lose it all
3) less 500:1 forex traders blowing up accounts=better reputation for the forex trader
4) not necessarily less liquidity, 2% of forex is retail /

It's all good people
  • #426
  • Edited 11:40am Jan 31, 2010 10:39am | Edited 11:40am
Quoting Scarlett
. Maybe that's because the UK account is a branch of an American brokerage. In any case, I wouldn't let that stop me now. Just get on a "live chat" and ask to be able to chat with a new accounts rep for this issue. I don't think there is much fuss.......However, this discussion is probably moot since, supposedly on April 1, CFTC is going to commence to bullying foreign brokerages with all of this and they will probably stop having US customers altogether..
That is my concern too, that if they close the loophole and get unquestionable power over all retail, then US retail FX might go the way of CFD's. That is why I think CFCT's scope of power needs to be challenged in court now(legislating their scope of power and enforcing their power at the same time), before this whole proposal becomes law, not only the margin part, so that CFCT's power is clearly defined regarding spot...if this thing goes thru they may not stop with US brokers but may try to make it illegal for US residents to open overseas FX accounts. The CFCT has been predatory in nature with regards to spot fx and will do everything it can to bring liquidity to FX futures, if 90% of US retail goes abroad, this current proposal would not have served the purpose that they were seeking.
  • #427
  • Jan 31, 2010 11:01am Jan 31, 2010 11:01am
Look for banks that offer FX. They're regulated differently than the smaller broker/dealers and will continue to offer higher leverage.
  • #428
  • Jan 31, 2010 12:20pm Jan 31, 2010 12:20pm
Quoting Makaveli390
Look for banks that offer FX. They're regulated differently than the smaller broker/dealers and will continue to offer higher leverage.
Care to mention anyone? I know CitiFX Pro is just another retail forex broker.
Hindsight is 20/20
  • #429
  • Edited 12:44pm Jan 31, 2010 12:33pm | Edited 12:44pm
Don't be confused by the rhetoric here. This is a nonsensical idea and does absolutely nothing to reduce the risk to any investor. As has been noted many times previously, one can just as easily wager the entire account balance at 10:1 as at 100:1.

This proposal actually reinforces the urge to place larger size trades simply to make the trade worthwhile. By the time you cover the spread and then account for swap rates, is there a reasonable expectation of return left? I believe many traders will think not.

Do the math. If you are trading with a 3% total account risk at 100% margin, you will now have to risk 30% of your account to make an equal trade. How in any way possible does that help an individual trader?

Remember, MARGIN DOES NOT EQUAL RISK. The size of your trade and the size of your stop is what determines your risk.

In the end, this is a stupid idea with no basis in reality for the desired outcome. It is another example of supposed regulations to help the small investor that instead does him great harm. Just as when they raised the margin requirements a few years back for equity trades, it simply forced a lot of investors out of the market. I believe that is exactly what big government and big banks want. They want us to to send our money to them to manage at exorbitant rates and fees because obviously we are all too stupid to make decisions for ourselves. And when they lose it all we again have to bail them out with our tax dollars.

How about for once, government keeps its dirty nose out of our business and lets the free markets be free.

Steve
No matter your system, money management is the key to success.
  • #430
  • Jan 31, 2010 1:45pm Jan 31, 2010 1:45pm
Quoting radatats
Don't be confused by the rhetoric here. This is a nonsensical idea and does absolutely nothing to reduce the risk to any investor. As has been noted many times previously, one can just as easily wager the entire account balance at 10:1 as at 100:1.

This proposal actually reinforces the urge to place larger size trades simply to make the trade worthwhile. By the time you cover the spread and then account for swap rates, is there a reasonable expectation of return left? I believe many traders will think not.

Do the math. If you are trading with...
You've got it.

Quoting TGpop
10:1 is actually perfect, that way :
1) you have 'enough' leverage to profit
2) you won't be tempted to be a pig and gamble 500:1 and lose it all
3) less 500:1 forex traders blowing up accounts=better reputation for the forex trader
4) not necessarily less liquidity, 2% of forex is retail /

It's all good people
This guy doesn't.
  • #431
  • Jan 31, 2010 3:19pm Jan 31, 2010 3:19pm
Quoting TGpop
10:1 is actually perfect, that way :
1) you have 'enough' leverage to profit
2) you won't be tempted to be a pig and gamble 500:1 and lose it all
3) less 500:1 forex traders blowing up accounts=better reputation for the forex trader
4) not necessarily less liquidity, 2% of forex is retail /

It's all good people
1. What is enough? The little man/woman will not be able to profit from 10:1 leverage. To place just a single 1 minilot order someone will need to have free margin of at a minimum $1,000.

2. Don't be ridiculous, if someone is going to lose it all, they will do it (only lose more money because they will need to start with more) at 10:1

3. More $10,000 accounts for those that have that sort of money to start up blowing up instead of $100 accounts, guess who will be making more fuss to the brokers.

4. Those are old figures and were speculation when they were drawn up, look those figures up now and I think you'll find it grown a great deal in the last 12months.
  • #432
  • Jan 31, 2010 3:48pm Jan 31, 2010 3:48pm
Quoting luckylady
1. What is enough? The little man/woman will not be able to profit from 10:1 leverage. To place just a single 1 minilot order someone will need to have free margin of at a minimum $1,000.
Even more, depending on the pair, it would only be that little on the Yen. On EURUSD one minilot will require $1,3861 in equity at 10 to 1.
  • #433
  • Jan 31, 2010 3:57pm Jan 31, 2010 3:57pm
Quoting wwwin
Even more, depending on the pair, it would only be that little on the Yen. On EURUSD one minilot will require $1,3861 in equity at 10 to 1.
Thats why I put minimum, the only ones I could get away with $1,000 is USD/JPY, USD/CAD or USD/CHF in other words anything with USD at the front of the pair. GBP/USD would need around $1,600 of margin.
  • #434
  • Jan 31, 2010 4:31pm Jan 31, 2010 4:31pm
Quoting luckylady
Thats why I put minimum, the only ones I could get away with $1,000 is USD/JPY, USD/CAD or USD/CHF in other words anything with USD at the front of the pair. GBP/USD would need around $1,600 of margin.
That's right, and that is just to place the trade, if it goes 1 pip against you you are stopped....how about margin for the SL...LOL, it is already estimated by FXDC that 90% would jump offshore...we will see what happens.
  • #435
  • Feb 1, 2010 12:44am Feb 1, 2010 12:44am
I keep getting updates on this thread in my email, though I do trade for real for a living (some of you look as if you have too much idle time) just thought I'd take a peek. I see you guys/gals are still chomping at the bit here.
If any of you open minded traders have an interest outside the Spot Retail scene , send me a private message. (This is not a sales pitch, rather a offering of credible advice for those of you that have an ear outside of the box)
I only trade commodities. I abandoned the Retail FX Freak show completely and I'm glad I was open minded enough to try something esle beside spot. Most of the hecklers here are incapable of accepting change and will fight tooth and nail over this imposed margin shift, all the way until their accounts are deactivated for insufficient funds. Then starting a new thread about: "How can they reinvent the Forex Wheel of Misfortune"
Nobody knows if this imposition will come to light. The U.S. government is pointing fingers at all financial entities for no further purpose other than to keep foreign inflows intact and ignorant to the feable U.S. buck! Being once a Spot Fx junkie I do understand the concern, however considering this shadow cast and the fear that has set up counter-measure of anti-governing babbling One would be wise to attain a backup plan. At least the ones here that trade for real.
"Look Left Think Right"
  • #436
  • Feb 1, 2010 1:38am Feb 1, 2010 1:38am
I am having a giggle regarding all the posts by the "stupids" that go in the vein of :

"10:1 is actually perfect , yadda yadda... blah blah" .

New members that joined 1 hr before posting..... HMMMMMM

I wonder who the ones posting in support of 10:1 are ...... anybody hazard a guess ?
  • #437
  • Feb 1, 2010 1:51am Feb 1, 2010 1:51am
Quoting Rise
I am having a giggle regarding all the posts by the "stupids" that go in the vein of :

"10:1 is actually perfect , yadda yadda... blah blah" .

New members that joined 1 hr before posting..... HMMMMMM

I wonder who the ones posting in support of 10:1 are ...... anybody hazard a guess ?
What i like to do is take a look at their history, what they have posted in the past; it really shows a lot about the character and you can easily tell whos side they are on.
ok Friendo? This is madness!?!? - THIS, IS, FOREX!!!
  • #438
  • Feb 1, 2010 1:56am Feb 1, 2010 1:56am
Quoting CurrencyAnalyst
If any of you open minded traders have an interest outside the Spot Retail scene , send me a private message. (This is not a sales pitch, rather a offering of credible advice for those of you that have an ear outside of the box)
I only trade commodities. I abandoned the Retail FX Freak show completely and I'm glad I was open minded enough to try something esle beside spot.
Is that the NFA boys and their equities buddies I can hear sniggering away in the background?

For those who do trade other markets, there are certainly much more attractive pickings than retail Fx shackled n chained at 10:1.

Every trader has to determine their own level of comfort with risk (and hopefully keep all in good balance). Forex isn't for the feint-hearted. knowledge deficient or risk averse (in which case, commodities are a fine choice).

Every trader has to decide what is comfortable for them, but that doesn't (or shouldn't) give any of us a mortgage on prescribing what is right for others just because our choice happens to be right for us.
  • #439
  • Feb 1, 2010 2:46am Feb 1, 2010 2:46am
Quoting TGpop
10:1 is actually perfect, that way :
1) you have 'enough' leverage to profit
2) you won't be tempted to be a pig and gamble 500:1 and lose it all
3) less 500:1 forex traders blowing up accounts=better reputation for the forex trader
4) not necessarily less liquidity, 2% of forex is retail /

It's all good people
Actually, 100:1 is what is legal in the US at the moment, which is high enough for most people to not feel limited and want to venture to 500:1. 10:1 is severely limited, and more people will try 500:1 with services outside of the US and lose it all.

What I am curious about, is what they are trying to protect us from. 100:1 allows the little guy to actually participate without much risk. Like was stated earlier, $1000 can earn profits safely, and all there is to lose is that tiny learning investment. That same guy now has to pay the big blind of $10000 to have that same experience. So, sorry little guy trying to take big bank money, you're gonna have to forget about your kids going to college for a little while and actually gamble 10x more, because the casino wants more of what you actually have, not the margin they gave you.

With 100:1 max leverage, at least I feel like I have options. At least there is a chance that I can beat the house without risking my house. With 100:1 leverage, trading mini-lots was playing it safe. I could easily trade with a true leverage of 1:1 to 5:1 while making money and not risking too much of my account. With 10:1, a $10000 account becomes a joke. I barely meet margin requirements after a few bad moves and I lose real money. To be able to trade mini lots I have to invest $100k with a broker that I don't even know; the safest option is now micro-lots--Goodbye Forex trading.

I would drop my objection to the 10:1 if the banks that are doing the majority of the trading had their margin dropped to 10:1.

Negotiation is just a word to the little guy.

Everyone write your emails.
  • #440
  • Feb 1, 2010 7:29am Feb 1, 2010 7:29am
Jade gate ( quote) :
Every trader has to determine their own level of comfort with risk (and hopefully keep all in good balance). Forex isn't for the feint-hearted. knowledge deficient or risk averse (in which case, commodities are a fine choice).

We have a Genious here folks! A Jaded Leverage-Lord, One that speaks as a master of Commodities trading sounding it off to be so simple that he'd rather face the Challenge of Spot Fx to feel like a knowledgeable credible trader. Finally I get a comic response from one of you! I'd put my series 3/7 credibility against a dog barker like this any day.
"Look Left Think Right"
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