US citizens won't be able to have forex accounts overseas

Well I'm sure I saw you post that you didn't really care if it went down that far, and at 5:1 you wouldn't be able to afford USD/x pairs either.

But the point is NOT everybody trade like The Fool! That's our point. Everybody's trading strategy is different. You are assuming that everybody trades with the same strategy as The Fool.

Ummm, 5:1 was the leverage used on that 10k account 50k trade, remember? It was the same trade you told me I was about to get a margin call on as soon as I opened it!

Oh jeepers, wtf's going on here on these forums!

Ok then, so what's your leverage, stop, and risk %?


I'm off for a stiff drink and a lie down in a dark room after all this!!

C'ya......

It's no prob. I see your point of the government wanting to cap the leverage rates for regulating for the brokers. Because it is pretty much established that a trader can be profitable at any leverage rate.

Although I do see the leverage rate of 50:1 being a possible outcome. But it's still not the right solution if the government is really capping the rate to make brokers run a less risky business mode without sacrificing their potential business? Would you really think that there are no brokers out there who can afford to run successfully at 100:1 leverage rate? There are brokers right now who offered leverage rate at 200:1 and they were fine. And for those brokers, they are being forced to be less competitive with their leverage rate cut when in fact their capital level actually allow them to stay in business at higher leverage rate.

I think that's why they had to put this "extraterritorial" power in the "Dodd-Frank" Fin Reg Bill there to make sure that no foreign brokers who can offer higher leverage will compete for US customers with US brokers who will be forced be stuck with this 10:1 leverage rate if it passes.

I think whats going on is that someone isn't actually reading the posts, this is what I said:

I will attempt to give an example of the effects of the leverage changes using an account with FXCM Micro.

FXCM US Micro... approx 1:100

EUR/USD = $15 = 1:066.67
GBP/USD = $17 = 1:058.82
USD/JPY = $10 = 1:100.00
AUD/USD = $10 = 1:100.00

FXCM UK Micro... approx 1:400

EUR/USD = $3.75 = 1:266.67
GBP/USD = $4.25 = 1:235.29
USD/JPY = $2.50 = 1:400.00
AUD/USD = $2.50 = 1:400.00


Most traders prefer to risk 2% of their account per trade, and make about 2% of their account by the end of the trading day. The following three examples show the results of trading the USD/JPY with a balance of $5000 in the account. Each line represents a period first with the amount of the margin used in the lot for the trade(s), then the profit for that period, then the ending account balance for that period, the amount of pips gained, and the percentage of profit gained in proportion to the previous period's, or beginning, account balance. The lot sizes increase each period because we are compounding after each one. Each period can represent one trade or a series of trades in total. Each period can be one trading day or week or month or whatever time period you prefer. This is assuming the trader is successful in achieving 90 to 150 pips per period regardless of drawdown. One USD/JPY micro lot is $0.12 per pip.

Here we have the leverage set at 400:1 which is $2.5 needed to trade every $1K micro lot. The amount of margin used is 2% of the account. So in the first period, 40 micro lots are used which require $100, which is 2% of $5000.

1) lot = $100.00, profit = $470.40, balance = $5,470.40, pips = 98, 9.408%
2) lot = $107.50, profit = $521.16, balance = $5,991.56, pips = 101, 9.52690845276%
3) lot = $117.50, profit = $518.88, balance = $6,510.44, pips = 92, 8.66018198933%
4) lot = $130.00, profit = $586.56, balance = $7,097.00, pips = 94, 9.00952930985%
5) lot = $140.00, profit = $786.24, balance = $7,883.24, pips = 117, 11.0784838664%
6) lot = $157.50, profit = $1,035.72, balance = $8,918.96, pips = 137, 13.1382527996%
7) lot = $177.50, profit = $1,056.48, balance = $9,975.44, pips = 124, 11.8453272579%
8) lot = $197.50, profit = $1,052.28, balance = $11,027.72, pips = 111, 10.5487076259%
9) lot = $220.00, profit = $1,362.24, balance = $12,389.96, pips = 129, 12.3528707657%
10) lot = $247.50, profit = $1,259.28, balance = $13,649.24, pips = 106, 10.1637132%
11) lot = $272.50, profit = $1,425.72, balance = $15,074.96, pips = 109, 10.4454167412%
12) lot = $300.00, profit = $1,958.40, balance = $17,033.36, pips = 136, 12.9910792466%
13) lot = $340.00, profit = $2,056.32, balance = $19,089.68, pips = 126, 12.0723098672%
14) lot = $380.00, profit = $1,969.92, balance = $21,059.60, pips = 108, 10.3192929373%
15) lot = $420.00, profit = $2,036.16, balance = $23,095.76, pips = 101, 9.66855970674%
16) lot = $460.00, profit = $2,406.72, balance = $25,502.48, pips = 109, 10.4206140001%
17) lot = $510.00, profit = $2,594.88, balance = $28,097.36, pips = 106, 10.1750104304%
18) lot = $560.00, profit = $3,494.40, balance = $31,591.76, pips = 130, 12.436755624%
19) lot = $630.00, profit = $3,114.72, balance = $34,706.48, pips = 103, 9.85927976156%
20) lot = $692.50, profit = $3,623.16, balance = $38,329.64, pips = 109, 10.4394337887%
21) lot = $765.00, profit = $5,067.36, balance = $43,397.00, pips = 138, 13.2204737639%
22) lot = $867.50, profit = $5,454.84, balance = $48,851.84, pips = 131, 12.5696246284%
23) lot = $975.00, profit = $4,773.60, balance = $53,625.44, pips = 102, 9.7715869044%
24) lot = $1,072.50, profit = $7,413.12, balance = $61,038.56, pips = 144, 13.8238865732%
25) lot = $1,220.00, profit = $7,437.12, balance = $68,475.68, pips = 127, 12.1842979258%
26) lot = $1,367.50, profit = $6,760.92, balance = $75,236.60, pips = 103, 9.87346164361%
27) lot = $1,502.50, profit = $10,601.64, balance = $85,838.24, pips = 147, 14.0910673794%
28) lot = $1,715.00, profit = $11,689.44, balance = $97,527.68, pips = 142, 13.6179865757%
29) lot = $1,950.00, profit = $8,798.40, balance = $106,326.08, pips = 94, 9.02143883665%
30) lot = $2,125.00, profit = $12,036.00, balance = $118,362.08, pips = 118, 11.3198944229%

Here we have the leverage set at 100:1 which is $10 needed to trade every $1K micro lot. The amount of margin used is 2% of the account. So in the first period, 10 micro lots are used which require $100, which is 2% of $5000.

1) lot = $100.00, profit = $157.20, balance = $5,157.20, pips = 131, 3.144%
2) lot = $100.00, profit = $110.40, balance = $5,267.60, pips = 92, 2.14069650198%
3) lot = $100.00, profit = $120.00, balance = $5,387.60, pips = 100, 2.27807730276%
4) lot = $100.00, profit = $175.20, balance = $5,562.80, pips = 146, 3.25191179746%
5) lot = $110.00, profit = $129.36, balance = $5,692.16, pips = 98, 2.32544761631%
6) lot = $110.00, profit = $150.48, balance = $5,842.64, pips = 114, 2.64363615921%
7) lot = $110.00, profit = $124.08, balance = $5,966.72, pips = 94, 2.12369750661%
8) lot = $110.00, profit = $179.52, balance = $6,146.24, pips = 136, 3.0086881905%
9) lot = $120.00, profit = $159.84, balance = $6,306.08, pips = 111, 2.60061435935%
10) lot = $120.00, profit = $142.56, balance = $6,448.64, pips = 99, 2.26067541167%
11) lot = $120.00, profit = $178.56, balance = $6,627.20, pips = 124, 2.76895593489%
12) lot = $130.00, profit = $202.80, balance = $6,830.00, pips = 130, 3.06011588605%
13) lot = $130.00, profit = $195.00, balance = $7,025.00, pips = 125, 2.85505124451%
14) lot = $140.00, profit = $201.60, balance = $7,226.60, pips = 120, 2.86975088968%
15) lot = $140.00, profit = $188.16, balance = $7,414.76, pips = 112, 2.6037140564%
16) lot = $140.00, profit = $240.24, balance = $7,655.00, pips = 143, 3.24002395223%
17) lot = $150.00, profit = $171.00, balance = $7,826.00, pips = 95, 2.23383409536%
18) lot = $150.00, profit = $205.20, balance = $8,031.20, pips = 114, 2.62202913366%
19) lot = $160.00, profit = $247.68, balance = $8,278.88, pips = 129, 3.08397250722%
20) lot = $160.00, profit = $182.40, balance = $8,461.28, pips = 95, 2.20319656765%
21) lot = $160.00, profit = $234.24, balance = $8,695.52, pips = 122, 2.76837547038%
22) lot = $170.00, profit = $293.76, balance = $8,989.28, pips = 144, 3.37829135003%
23) lot = $170.00, profit = $291.72, balance = $9,281.00, pips = 143, 3.24519872559%
24) lot = $180.00, profit = $317.52, balance = $9,598.52, pips = 147, 3.42118306217%
25) lot = $190.00, profit = $250.80, balance = $9,849.32, pips = 110, 2.61290282252%
26) lot = $190.00, profit = $298.68, balance = $10,148.00, pips = 131, 3.03249361377%
27) lot = $200.00, profit = $285.60, balance = $10,433.60, pips = 119, 2.81434765471%
28) lot = $200.00, profit = $321.60, balance = $10,755.20, pips = 134, 3.08234933292%
29) lot = $210.00, profit = $274.68, balance = $11,029.88, pips = 109, 2.55392740256%
30) lot = $220.00, profit = $248.16, balance = $11,278.04, pips = 94, 2.24988848473%

Here we have the leverage set at 10:1 which is $100 needed to trade every $1K micro lot. The amount of margin used is 2% of the account. So in the first period, 1 micro lot is used which requires $100, which is 2% of $5000.

1) lot = $100.00, profit = $16.92, balance = $5,016.92, pips = 141, 0.3384%
2) lot = $100.00, profit = $13.92, balance = $5,030.84, pips = 116, 0.277461071733%
3) lot = $100.00, profit = $12.00, balance = $5,042.84, pips = 100, 0.238528754641%
4) lot = $100.00, profit = $15.12, balance = $5,057.96, pips = 126, 0.299831047584%
5) lot = $100.00, profit = $12.36, balance = $5,070.32, pips = 103, 0.244367294324%
6) lot = $100.00, profit = $11.16, balance = $5,081.48, pips = 93, 0.220104451001%
7) lot = $100.00, profit = $16.92, balance = $5,098.40, pips = 141, 0.33297385801%
8) lot = $100.00, profit = $13.32, balance = $5,111.72, pips = 111, 0.261258434019%
9) lot = $100.00, profit = $17.28, balance = $5,129.00, pips = 144, 0.338046684873%
10) lot = $100.00, profit = $13.32, balance = $5,142.32, pips = 111, 0.259699746539%
11) lot = $100.00, profit = $16.44, balance = $5,158.76, pips = 137, 0.319700057562%
12) lot = $100.00, profit = $14.52, balance = $5,173.28, pips = 121, 0.281462987229%
13) lot = $100.00, profit = $16.68, balance = $5,189.96, pips = 139, 0.322426004392%
14) lot = $100.00, profit = $17.76, balance = $5,207.72, pips = 148, 0.342199169165%
15) lot = $100.00, profit = $16.20, balance = $5,223.92, pips = 135, 0.311076632384%
16) lot = $100.00, profit = $17.76, balance = $5,241.68, pips = 148, 0.339974578477%
17) lot = $100.00, profit = $17.88, balance = $5,259.56, pips = 149, 0.34111200989%
18) lot = $100.00, profit = $15.12, balance = $5,274.68, pips = 126, 0.287476518948%
19) lot = $100.00, profit = $16.32, balance = $5,291.00, pips = 136, 0.309402655706%
20) lot = $100.00, profit = $10.80, balance = $5,301.80, pips = 90, 0.20412020412%
21) lot = $100.00, profit = $12.36, balance = $5,314.16, pips = 103, 0.233128371496%
22) lot = $100.00, profit = $14.88, balance = $5,329.04, pips = 124, 0.280006623813%
23) lot = $100.00, profit = $10.92, balance = $5,339.96, pips = 91, 0.20491495654%
24) lot = $100.00, profit = $14.28, balance = $5,354.24, pips = 119, 0.267417733466%
25) lot = $100.00, profit = $14.04, balance = $5,368.28, pips = 117, 0.26222208941%
26) lot = $100.00, profit = $12.24, balance = $5,380.52, pips = 102, 0.228005990746%
27) lot = $100.00, profit = $12.60, balance = $5,393.12, pips = 105, 0.234178109179%
28) lot = $100.00, profit = $17.04, balance = $5,410.16, pips = 142, 0.315958109591%
29) lot = $100.00, profit = $14.52, balance = $5,424.68, pips = 121, 0.268383929496%
30) lot = $100.00, profit = $12.60, balance = $5,437.28, pips = 105, 0.232271765339%

Here we have the leverage set at 10:1 which is $100 needed to trade every $1K micro lot. The amount of margin used is 20% of the account. So in the first period, 10 micro lots are used which requires $1000, which is 20% of $5000.

1) lot = $1,000.00, profit = $123.60, balance = $5,123.60, pips = 103, 2.472%
2) lot = $1,000.00, profit = $109.20, balance = $5,232.80, pips = 91, 2.1313139199%
3) lot = $1,000.00, profit = $174.00, balance = $5,406.80, pips = 145, 3.32517963614%
4) lot = $1,000.00, profit = $128.40, balance = $5,535.20, pips = 107, 2.37478730488%
5) lot = $1,100.00, profit = $146.52, balance = $5,681.72, pips = 111, 2.64705882353%
6) lot = $1,100.00, profit = $187.44, balance = $5,869.16, pips = 142, 3.29900100674%
7) lot = $1,100.00, profit = $180.84, balance = $6,050.00, pips = 137, 3.08119049404%
8) lot = $1,200.00, profit = $188.64, balance = $6,238.64, pips = 131, 3.11801652893%
9) lot = $1,200.00, profit = $178.56, balance = $6,417.20, pips = 124, 2.86216226613%
10) lot = $1,200.00, profit = $197.28, balance = $6,614.48, pips = 137, 3.07423798541%
11) lot = $1,300.00, profit = $168.48, balance = $6,782.96, pips = 108, 2.54713900412%
12) lot = $1,300.00, profit = $171.60, balance = $6,954.56, pips = 110, 2.52986896576%
13) lot = $1,300.00, profit = $141.96, balance = $7,096.52, pips = 91, 2.04125063268%
14) lot = $1,400.00, profit = $203.28, balance = $7,299.80, pips = 121, 2.86450260127%
15) lot = $1,400.00, profit = $201.60, balance = $7,501.40, pips = 120, 2.76171949916%
16) lot = $1,500.00, profit = $199.80, balance = $7,701.20, pips = 111, 2.66350281281%
17) lot = $1,500.00, profit = $228.60, balance = $7,929.80, pips = 127, 2.96836856594%
18) lot = $1,500.00, profit = $196.20, balance = $8,126.00, pips = 109, 2.47421120331%
19) lot = $1,600.00, profit = $249.60, balance = $8,375.60, pips = 130, 3.07162195422%
20) lot = $1,600.00, profit = $211.20, balance = $8,586.80, pips = 110, 2.52161039209%
21) lot = $1,700.00, profit = $228.48, balance = $8,815.28, pips = 112, 2.66082824801%
22) lot = $1,700.00, profit = $291.72, balance = $9,107.00, pips = 143, 3.30925393181%
23) lot = $1,800.00, profit = $298.08, balance = $9,405.08, pips = 138, 3.27308663665%
24) lot = $1,800.00, profit = $218.16, balance = $9,623.24, pips = 101, 2.31959749412%
25) lot = $1,900.00, profit = $275.88, balance = $9,899.12, pips = 121, 2.86680993096%
26) lot = $1,900.00, profit = $291.84, balance = $10,190.96, pips = 128, 2.94814084484%
27) lot = $2,000.00, profit = $340.80, balance = $10,531.76, pips = 142, 3.34414029689%
28) lot = $2,100.00, profit = $294.84, balance = $10,826.60, pips = 117, 2.79953208201%
29) lot = $2,100.00, profit = $239.40, balance = $11,066.00, pips = 95, 2.21122051244%
30) lot = $2,200.00, profit = $279.84, balance = $11,345.84, pips = 106, 2.52882703777%

So as we can see, 10:1 leverage significantly limits a trader's ability to compound their profits over time, and also limits the amount of profit one can achieve for a given time period. In order to gain the same performance in profit of an account with 100:1 leverage, one would need to use 20% of their account as opposed 2% or would need to be able to achieve twice the amount of pips. Thus, having a greater chance of a margin call. In the examples above, for every profit achieved, turn that into a negative and double or triple it, add margin already used, and one can see their drawdown for that period. Even if a trader chooses not to compound, their ability to achieve a favorable profit per time period would be significantly lower, and would probably force such a trader to consider compounding or have a much bigger initial deposit into their account balance.

Why does that matter? My stats does NOT represent EVERYBODY's and this proposal is affecting EVERYBODY. Everybody's trading strategy is different. Since you are really dying to know, my stop and risk % is not even fixed; it's determined dynamically for each trade. And it's none of yours or the government's or anybody's business what my leverage is.

For the traders' sake, there are people who do trade at 100:1 leverage and they want to keep it and that should be enough for the government to lay off especially when it's not their buisness in the first place.

For the brokers' sake, the government needs to do lot better than just hand out a blanket reductioin of leverage rates across the board if they want to help and not destroy the Retail Forex industry.

This is the reason I very rarely get into these discussions and this will be my last post in this thread. If someone with 10 vouches against their name, doesn't understand leverage needed to trade, and leverage used in a trade then what hope is there for making them understand it will affect him as well in the end.

It doesn't affect me in the slightest because I am in the UK and when I last checked we still treated adults as adults, along with the rest of the civilised world.

It would be great if this did protect the vulnerable, but unfortunately it doesn't and the reason it doesn't is, it will make more people go over to other brokers that are not regulated, and there are plenty of them for people to choose from in the US without having to go abroad to do it, where those vulnerable people will have no recourse whatsoever.

Wow! Thanks for posting such a detailed illustration. This makes sense.

Then this begs another question: If every single trader or majority of the traders in a brokerage is able to pull off something like that, and the brokerage is a MM which means that it's taking the other side of the transaction, then if the traders, like in this example, are compounding the profit, the broker is compounding the losses.

Then wouldn't it better if the Forex industry becomes an ECN where brokers work for commissions?

I agree!

As far as I know a reduction to 5:1 has never been the proposal so why mention it? For dramatic effect?

Me too, but I have accounts with US brokers in order to take advantage of the new rules, specifically 2-43(a).

Ok, thanks for stopping by.

It matters because in reality, like The Fool, you're probably leveraged less than you think and therefore the impact of the proposed reduction from 100 to 10:1 will be significantly less, that's why it matters.

Hey, you protest as much as you like, bottom line is it's not going to get you anywhere so you may as well accept the reductions are coming and start thinking about ways to compensate for them rather than waste your time whinging!

It's your choice obviously, whatever makes you happy.

Well, thanks for your contribution to this discussion, Lucky!! You were good.

Actually according to the Dodd-Frank Fin Reg. Bill, CFTC has until October 19, 2010 deadline to make those proposals (including the 10:1 leverage change) into law. If CFTC doesn't, Retail Forex trading will be banned in the US. So there will not be any unregulated Retail forex broker for US citizens to choose from in the US.

So, if CFTC really wants to screw the Retail Forex industry, all they have to do is not publish the laws by Oct. 19 at all and nobody in the US will be able to trade Forex in an Retail environment. They will have to go abroad but with the "extraterritorial" power, not sure if they can.

That's beyond the point. But anyway, whatever.

Yeah I think you'll find mainstream brokers/MM's hedge their nett exposure on aggregate, they're not in the risk business!

lol, classic!

Ah I'm going to bed, too much entertainment for one day!

Oh yes, that's true. I forgot. But SOMEBODY has to take the loss. It's a zero-sum game.

Then if the risk exposure of the brokers are always hedged, then why do brokers have to run "high leverage casino model"? I will let The Fool answer that one. Hopefully he's done with plumbing.

So as a US citizen living in the US with a UK FXCM standard and UK Micro account will I be ALLOWED to continue trading with FXCM UK?

Will I be able to continue to use the standard 200:1 leverage.

The fact that I'm writing this makes me sick, as a former military officer it angers me that I'm in the position to have the government control me to this level.

Did you read Sonicpunk32's post or was that too sophisticated for you? He just illustrated to you that a reduction in leverage rate does reduce a trader's potential profit and like Luckylady illustrated to you, when the change in leverage rate might not even allow you to trade unless you put in more money. And my example just showed you that if traders trade like me, reduction in leverage rates won't even "protect" them.

So yes it DOES matter for traders.

Your appreciation is received. I hope it helps those who are against the laws to prove their point.

I can now see that those who live in the UK won't really be bothered to care about the leverage laws. This is something to keep in mind. Getting a UK residency might be a worthy investment after this.