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

It's about time you guys woke up... you're arguing with a cackling, busybody housewife.

That's a good question to ask Jason Rogers about in the FXCM Discussion thread. My hope is that existing UK accounts to US residents will be allowed to stay. But my guess is that they will probably be forced to convert the existing accounts back to the US firm.

I don't pretend to know much more than just a little bit about it. But Oanda has never had more than 50:1 available leverage, so far as I know. The futures merchants are living off commissions, so why can't the spot brokers do the same?

The high leverage is there to bring in the trader of little means and once his little means are lost, where do they go? The business model is based on roping in new suckers, I mean traders, on a continuous basis. I don't see the same kind of advertising effort put out by futures or options brokers...

Anyway, I think the days are numbered for the unregulated trading game. Attrition amongst the spot brokers has already been evident, and the ones that remain after a leverage reduction will probably raise spreads when their customer base is shrunk, which will make it harder for remaining spot traders to stay afloat, which will further reduce their ranks, etc, until the deal is done.

They do, in effect, right now it's called spread.

How do you account for the fact the other low leverage markets experience the same/similar W:L ratio as spot FX?

This is the link to an article that talks about this:

http://blogs.forbes.com/greatspecula...down-on-forex/

And here is the link to a PodCast of a conference call where investment attorneys were brought in to discuss this issue:

http://www.greencompany.com/Educatio...ngs-1003.shtml


Right now, there is a LOT of speculations on what is going to happen because all it boils down to is this "extraterritorial" power specified in the Dodd-Frank Fin. Reg. Bill and the interpretation of it and also the ability for CFTC to enforce the rules with the foreign brokers through the diplomatic channel.

So once the rules are published at the latest Oct. 19 of this year, there is going to be a LOT of adjustments and movements in the Forex industry.

I am not sure if that is true - not saying it isn't either.

But how would I account for low success rate in trading, in general?

Well, I guess it must be pretty hard to do. I look at the reasons I have failed in the past and poor risk management is the number one glaring mistake. Once one gets that lesson burned into one's psyche (mmm, love that smell) - and if one survives that burn - it is not hard to consistently make money trading.

What is the failure rate of business ventures of any kind? Most fail. Most fail quickly. I don't know, maybe 95% of all new businesses fail relatively quickly. I don't have a handy statistic - maybe its not that high, maybe it is.

I have started several businesses and none failed. It is love that I have failed at, so miserably, so many times. And now, alas, I must sugar my own churro.

According to what we are seeing in Dodd-Frank Bill, Yes, IF FXCM registers with CFTC.

Here is the link that talks more about this:

http://blogs.forbes.com/greatspecula...forex-traders/

Another question is, ff this reduced leverage rule goes into law, under the "extraterritorial" power, does that mean international broker like FXCM would be offfering differen leverage rates to customers depending on where they are? 200:1 leverage for UK customers and 10:1 to US customers?

Then what if an US citizen moves to UK and uses the FXCM UK platform, would he/she be able to enjoy the 200:1 leverage or would he/she still be stuck with 10:1 leverage simply because he/she is an US citizen?

I think these are the questions that US traders would like to have answers to and they better be answered fast when the proposal becomes law.

Good deal! You have a huge advantage over the rest of us knuckleheads.

Might want to consider cutting back on the sugar; it can make you go blind.

Well, this is what is said on the OANDA website:

----------------------------------------------------
Risk Management

To manage currency exposure and risk, OANDA uses sophisticated risk management technology to hedge aggregate client positions automatically with partner banks on a second-by-second basis.
-----------------------------------------------------

And it's from this statement that OANDA claims that they are risk-neutral and would need to trade against their clients. But if ALL of the Retail Forex brokers do that, then why would they need to trade against the traders, or do SL hunting? This is off-topic a bit, but this is just something I am wondering.

And if this is the model that most of the Retail Forex brokers operate, then their capital level would be fine? Then the government don't even need to
limit the leverage rate they want to offer for any reasons.

Well, I feel traders failure rate really has more to do with lack of experience, skills and MM knowledge than leverage rate especially if the brokers operate a model where it has no incentive to trade against the trader. That's why I feel the best way to address it is really through education not more regulation rules. I have failed before in daytrading stocks and the leverage rate that the broker was offering was 3:1.

The more that we are discussing about this, the more stupid I feel about this reduced leverage rule. It really serves no purpose except just to limit traders' profit.

You will have ALL the love you need here as long as you keep the black helicopters away.

hahaha ......good one

Dont be "fooled" though, everything isnt always as it seems.

Haha! I think you might have to get UK citizenship not just residency. With the "extraterritorial" power in Dodd-Frank Fin. Reg. bill, Uncle Sam can still go after you even if you live in UK but remain a US citizen.

But with FSA disbanding, I am not even sure about the future regulatory nature of UK financial industry.

For those of you who are interested:

Dodd-Frank SEC. 929Y. STUDY ON EXTRATERRITORIAL PRIVATE RIGHTS OF ACTION.

(a) In General- The Securities and Exchange Commission of the United States shall solicit public comment and thereafter conduct a study to determine the extent to which private rights of action under the antifraud provisions of the Securities and Exchange Act of 1934 (15 U.S.C. 78u-4) should be extended to cover-

(1) conduct within the United States that constitutes a significant step in the furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors;

(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.

In continuation with my previous example, here is another showing what it's like for a trader who has to make a living with the profits of his trading. In this example we are not going to compound anything. Being a bit more realistic, let's say this trader is capable of getting 50 to 80 pips a day. Each line represents a trading day. There are about 23 trading days in a month, so let's say only 18 of those days is when the market is able to give this trader his 50 to 80 pips. The trader needs to make $5,000 a month in order to survive and pay his bills.

Here the trader uses 2% of his account, which is $400 out of his $20,000 balance. The leverage is 1:100.

1) lot = $400.00, profit = $254.40, balance = $20,254.40, pips = 53, 1.272%
2) lot = $400.00, profit = $374.40, balance = $20,628.80, pips = 78, 1.872%
3) lot = $400.00, profit = $244.80, balance = $20,873.60, pips = 51, 1.224%
4) lot = $400.00, profit = $249.60, balance = $21,123.20, pips = 52, 1.248%
5) lot = $400.00, profit = $264.00, balance = $21,387.20, pips = 55, 1.32%
6) lot = $400.00, profit = $316.80, balance = $21,704.00, pips = 66, 1.584%
7) lot = $400.00, profit = $384.00, balance = $22,088.00, pips = 80, 1.92%
8) lot = $400.00, profit = $259.20, balance = $22,347.20, pips = 54, 1.296%
9) lot = $400.00, profit = $312.00, balance = $22,659.20, pips = 65, 1.56%
10) lot = $400.00, profit = $278.40, balance = $22,937.60, pips = 58, 1.392%
11) lot = $400.00, profit = $283.20, balance = $23,220.80, pips = 59, 1.416%
12) lot = $400.00, profit = $278.40, balance = $23,499.20, pips = 58, 1.392%
13) lot = $400.00, profit = $360.00, balance = $23,859.20, pips = 75, 1.8%
14) lot = $400.00, profit = $350.40, balance = $24,209.60, pips = 73, 1.752%
15) lot = $400.00, profit = $312.00, balance = $24,521.60, pips = 65, 1.56%
16) lot = $400.00, profit = $268.80, balance = $24,790.40, pips = 56, 1.344%
17) lot = $400.00, profit = $340.80, balance = $25,131.20, pips = 71, 1.704%
18) lot = $400.00, profit = $292.80, balance = $25,424.00, pips = 61, 1.464%

Here the trader uses 2% of his account, which is $400 out of his $20,000 balance. The leverage is 1:10.

1) lot = $400.00, profit = $37.44, balance = $20,037.44, pips = 78, 0.1872%
2) lot = $400.00, profit = $26.40, balance = $20,063.84, pips = 55, 0.132%
3) lot = $400.00, profit = $32.64, balance = $20,096.48, pips = 68, 0.1632%
4) lot = $400.00, profit = $35.52, balance = $20,132.00, pips = 74, 0.1776%
5) lot = $400.00, profit = $35.52, balance = $20,167.52, pips = 74, 0.1776%
6) lot = $400.00, profit = $36.48, balance = $20,204.00, pips = 76, 0.1824%
7) lot = $400.00, profit = $24.48, balance = $20,228.48, pips = 51, 0.1224%
8) lot = $400.00, profit = $32.64, balance = $20,261.12, pips = 68, 0.1632%
9) lot = $400.00, profit = $37.92, balance = $20,299.04, pips = 79, 0.1896%
10) lot = $400.00, profit = $36.48, balance = $20,335.52, pips = 76, 0.1824%
11) lot = $400.00, profit = $36.48, balance = $20,372.00, pips = 76, 0.1824%
12) lot = $400.00, profit = $31.20, balance = $20,403.20, pips = 65, 0.156%
13) lot = $400.00, profit = $36.96, balance = $20,440.16, pips = 77, 0.1848%
14) lot = $400.00, profit = $26.88, balance = $20,467.04, pips = 56, 0.1344%
15) lot = $400.00, profit = $33.12, balance = $20,500.16, pips = 69, 0.1656%
16) lot = $400.00, profit = $37.44, balance = $20,537.60, pips = 78, 0.1872%
17) lot = $400.00, profit = $37.44, balance = $20,575.04, pips = 78, 0.1872%
18) lot = $400.00, profit = $36.00, balance = $20,611.04, pips = 75, 0.18%

Well, it's the end of the month, and the trader has only managed to make $611 which isn't anywhere near enough to cover his bills. I can imagine the trader is shocked. Well, in order for him to reach his $5000 goal, this trader will have to continue trading for a much longer time. Remember that out of the 23 trading days in a month, only about 18 are profitable for this trader. So let's skip all the way forward to day 180. That's 10 months!

163) lot = $400.00, profit = $31.20, balance = $25,090.88, pips = 65, 0.156%
164) lot = $400.00, profit = $37.92, balance = $25,128.80, pips = 79, 0.1896%
165) lot = $400.00, profit = $32.16, balance = $25,160.96, pips = 67, 0.1608%
166) lot = $400.00, profit = $24.00, balance = $25,184.96, pips = 50, 0.12%
167) lot = $400.00, profit = $25.44, balance = $25,210.40, pips = 53, 0.1272%
168) lot = $400.00, profit = $35.52, balance = $25,245.92, pips = 74, 0.1776%
169) lot = $400.00, profit = $37.92, balance = $25,283.84, pips = 79, 0.1896%
170) lot = $400.00, profit = $28.32, balance = $25,312.16, pips = 59, 0.1416%
171) lot = $400.00, profit = $27.84, balance = $25,340.00, pips = 58, 0.1392%
172) lot = $400.00, profit = $30.24, balance = $25,370.24, pips = 63, 0.1512%
173) lot = $400.00, profit = $28.32, balance = $25,398.56, pips = 59, 0.1416%
174) lot = $400.00, profit = $27.36, balance = $25,425.92, pips = 57, 0.1368%
175) lot = $400.00, profit = $25.92, balance = $25,451.84, pips = 54, 0.1296%
176) lot = $400.00, profit = $38.40, balance = $25,490.24, pips = 80, 0.192%
177) lot = $400.00, profit = $37.44, balance = $25,527.68, pips = 78, 0.1872%
178) lot = $400.00, profit = $38.40, balance = $25,566.08, pips = 80, 0.192%
179) lot = $400.00, profit = $32.16, balance = $25,598.24, pips = 67, 0.1608%
180) lot = $400.00, profit = $36.00, balance = $25,634.24, pips = 75, 0.18%

What must this trader now do in order to make $5000 a month with 1:10 leverage? He must now have $200,000 in his account.

1) lot = $4,000.00, profit = $283.20, balance = $200,283.20, pips = 59, 0.1416%
2) lot = $4,000.00, profit = $312.00, balance = $200,595.20, pips = 65, 0.156%
3) lot = $4,000.00, profit = $259.20, balance = $200,854.40, pips = 54, 0.1296%
4) lot = $4,000.00, profit = $340.80, balance = $201,195.20, pips = 71, 0.1704%
5) lot = $4,000.00, profit = $331.20, balance = $201,526.40, pips = 69, 0.1656%
6) lot = $4,000.00, profit = $345.60, balance = $201,872.00, pips = 72, 0.1728%
7) lot = $4,000.00, profit = $316.80, balance = $202,188.80, pips = 66, 0.1584%
8) lot = $4,000.00, profit = $336.00, balance = $202,524.80, pips = 70, 0.168%
9) lot = $4,000.00, profit = $264.00, balance = $202,788.80, pips = 55, 0.132%
10) lot = $4,000.00, profit = $312.00, balance = $203,100.80, pips = 65, 0.156%
11) lot = $4,000.00, profit = $336.00, balance = $203,436.80, pips = 70, 0.168%
12) lot = $4,000.00, profit = $254.40, balance = $203,691.20, pips = 53, 0.1272%
13) lot = $4,000.00, profit = $316.80, balance = $204,008.00, pips = 66, 0.1584%
14) lot = $4,000.00, profit = $331.20, balance = $204,339.20, pips = 69, 0.1656%
15) lot = $4,000.00, profit = $254.40, balance = $204,593.60, pips = 53, 0.1272%
16) lot = $4,000.00, profit = $321.60, balance = $204,915.20, pips = 67, 0.1608%
17) lot = $4,000.00, profit = $374.40, balance = $205,289.60, pips = 78, 0.1872%
18) lot = $4,000.00, profit = $307.20, balance = $205,596.80, pips = 64, 0.1536%

...Or find a way to make about 400 pips a day... which is... possible, but practically impossible.

1) lot = $400.00, profit = $183.84, balance = $20,183.84, pips = 383, 0.9192%
2) lot = $400.00, profit = $189.12, balance = $20,372.96, pips = 394, 0.9456%
3) lot = $400.00, profit = $186.24, balance = $20,559.20, pips = 388, 0.9312%
4) lot = $400.00, profit = $186.24, balance = $20,745.44, pips = 388, 0.9312%
5) lot = $400.00, profit = $192.00, balance = $20,937.44, pips = 400, 0.96%
6) lot = $400.00, profit = $190.56, balance = $21,128.00, pips = 397, 0.9528%
7) lot = $400.00, profit = $188.16, balance = $21,316.16, pips = 392, 0.9408%
8) lot = $400.00, profit = $191.52, balance = $21,507.68, pips = 399, 0.9576%
9) lot = $400.00, profit = $182.88, balance = $21,690.56, pips = 381, 0.9144%
10) lot = $400.00, profit = $191.04, balance = $21,881.60, pips = 398, 0.9552%
11) lot = $400.00, profit = $191.52, balance = $22,073.12, pips = 399, 0.9576%
12) lot = $400.00, profit = $192.00, balance = $22,265.12, pips = 400, 0.96%
13) lot = $400.00, profit = $188.16, balance = $22,453.28, pips = 392, 0.9408%
14) lot = $400.00, profit = $189.12, balance = $22,642.40, pips = 394, 0.9456%
15) lot = $400.00, profit = $184.32, balance = $22,826.72, pips = 384, 0.9216%
16) lot = $400.00, profit = $184.80, balance = $23,011.52, pips = 385, 0.924%
17) lot = $400.00, profit = $182.88, balance = $23,194.40, pips = 381, 0.9144%
18) lot = $400.00, profit = $192.00, balance = $23,386.40, pips = 400, 0.96%
19) lot = $400.00, profit = $182.88, balance = $23,569.28, pips = 381, 0.9144%
20) lot = $400.00, profit = $189.60, balance = $23,758.88, pips = 395, 0.948%
21) lot = $400.00, profit = $192.00, balance = $23,950.88, pips = 400, 0.96%
22) lot = $400.00, profit = $188.16, balance = $24,139.04, pips = 392, 0.9408%
23) lot = $400.00, profit = $189.12, balance = $24,328.16, pips = 394, 0.9456%

...Or use 20% of his account balance. On day one, assuming $16,000 (80%) of usable margin is left, the market would have to go against the trader by 3,334 pips in order to cause a margin call.

1) lot = $4,000.00, profit = $360.00, balance = $20,360.00, pips = 75, 1.8%
2) lot = $4,000.00, profit = $278.40, balance = $20,638.40, pips = 58, 1.392%
3) lot = $4,000.00, profit = $316.80, balance = $20,955.20, pips = 66, 1.584%
4) lot = $4,000.00, profit = $240.00, balance = $21,195.20, pips = 50, 1.2%
5) lot = $4,000.00, profit = $316.80, balance = $21,512.00, pips = 66, 1.584%
6) lot = $4,000.00, profit = $340.80, balance = $21,852.80, pips = 71, 1.704%
7) lot = $4,000.00, profit = $259.20, balance = $22,112.00, pips = 54, 1.296%
8) lot = $4,000.00, profit = $249.60, balance = $22,361.60, pips = 52, 1.248%
9) lot = $4,000.00, profit = $379.20, balance = $22,740.80, pips = 79, 1.896%
10) lot = $4,000.00, profit = $316.80, balance = $23,057.60, pips = 66, 1.584%
11) lot = $4,000.00, profit = $264.00, balance = $23,321.60, pips = 55, 1.32%
12) lot = $4,000.00, profit = $259.20, balance = $23,580.80, pips = 54, 1.296%
13) lot = $4,000.00, profit = $326.40, balance = $23,907.20, pips = 68, 1.632%
14) lot = $4,000.00, profit = $249.60, balance = $24,156.80, pips = 52, 1.248%
15) lot = $4,000.00, profit = $297.60, balance = $24,454.40, pips = 62, 1.488%
16) lot = $4,000.00, profit = $307.20, balance = $24,761.60, pips = 64, 1.536%
17) lot = $4,000.00, profit = $259.20, balance = $25,020.80, pips = 54, 1.296%
18) lot = $4,000.00, profit = $379.20, balance = $25,400.00, pips = 79, 1.896%

What was once doable with $5000 @ 1:400 leverage (1,000 pips to margin call)...

1) lot = $100.00, profit = $288.00, balance = $5,288.00, pips = 60, 5.76%
2) lot = $100.00, profit = $316.80, balance = $5,604.80, pips = 66, 6.336%
3) lot = $100.00, profit = $254.40, balance = $5,859.20, pips = 53, 5.088%
4) lot = $100.00, profit = $297.60, balance = $6,156.80, pips = 62, 5.952%
5) lot = $100.00, profit = $336.00, balance = $6,492.80, pips = 70, 6.72%
6) lot = $100.00, profit = $336.00, balance = $6,828.80, pips = 70, 6.72%
7) lot = $100.00, profit = $249.60, balance = $7,078.40, pips = 52, 4.992%
8) lot = $100.00, profit = $364.80, balance = $7,443.20, pips = 76, 7.296%
9) lot = $100.00, profit = $384.00, balance = $7,827.20, pips = 80, 7.68%
10) lot = $100.00, profit = $288.00, balance = $8,115.20, pips = 60, 5.76%
11) lot = $100.00, profit = $249.60, balance = $8,364.80, pips = 52, 4.992%
12) lot = $100.00, profit = $340.80, balance = $8,705.60, pips = 71, 6.816%
13) lot = $100.00, profit = $321.60, balance = $9,027.20, pips = 67, 6.432%
14) lot = $100.00, profit = $273.60, balance = $9,300.80, pips = 57, 5.472%
15) lot = $100.00, profit = $288.00, balance = $9,588.80, pips = 60, 5.76%
16) lot = $100.00, profit = $316.80, balance = $9,905.60, pips = 66, 6.336%
17) lot = $100.00, profit = $254.40, balance = $10,160.00, pips = 53, 5.088%
18) lot = $100.00, profit = $264.00, balance = $10,424.00, pips = 55, 5.28%

... would now require $200,000. That's 40,833 pips needed to cause a margin call. Everyone has their own trading system and style, so everyone will interpret this data differently. But do you really want to be forced to have a 40K pip cushion as opposed to 1,000 pips? No matter what trading style you use, how often does the market have to go against you beyond 500 pips before you see a 50 pip profit in your trade?

If your trader is not setting aside every third pip for the tax man then he is just asking for trouble. Oh, wait, I forgot, most traders never actually make any money trading so of course they don't pay any taxes. Which completely explains why they bitch so loud about having to pay taxes.

Ok so it was going to be my last post, but I have to bite on this one. You did: Which shows you don't know the difference between what you are actually using on a trade and what leverage you need to place a trade in the first place.

I'm sure having been burned in that respect would colour your thoughts on that particular piece of legislation, I've never had a trade reversed from any broker I've traded with ever so have never felt the need for that protection, BUT being in the UK you have the luxury of choosing, so if you find the margin requirement gets too much for you after all, you can just go back to a UK, FSA regulated broker, the people on this forum from the US don't have that luxury, so what gives you the right to tell them its good for them.

I have to take a little bit of everyone’s side here. First off, I don’t like to see the government involved in anything more than it is already, but significant changes in retail Forex are bound to come. Not too many people know anything about Forex whatsoever. But a lot of people have a vague idea about the definition of leverage and to the non-participant leverage usually conjures up notions of risk. This makes Forex with up to 1000:1 margin accounts an easy target. So there’s that.

And, on top of that, the majority of us get slaughtered so there’s that. Government is anxious to prove that they’re making great strides toward reducing/eliminating risky financial practice. Reducing leverage in a market where most get their arse handed to them is an easy sell. Every other industry has laws and rules and restrictions shoved down their throat and it’s safe to say none of them like it. The airline, trucking, healthcare, auto, logging, and a whole litany of industries with a helluva lot more influence than retail trading has, get hamstrung with redundant rules, and restrictions every day.

I’d like to see the government stay out of it and let the already in place, undeniable axiom of “The Stupid Shall Be Punished” prevail. There is plenty of information available on margin, leverage and risk. But I’ll bet that half of the members of this board can’t quickly tell how much they are leveraged at any given time even though it only takes two numbers to compute it. 10:1 leverage won’t matter to me but, to be fair that doesn’t mean it won’t affect others. I could see a successful grid trader with multiple positions being leveraged higher than that provided his positions aren’t highly correlated.

Disaster for retail Forex on the horizon? If anyone doesn’t know the difference between real leverage and margin based leverage (and I suspect some here don’t) they may be wringing their hands over nothing. A reduction in leverage won’t be the end of retail trading. There are plenty of brokers offering micro and nano lots which aren’t a bad idea anyway if you’re trying to achieve proper granularity in trade size.

I’ve always suggested protecting funds by not putting your whole trading nut in your main trading account. This, to me, is the worst effect of reduced leverage--we’ll be less able to protect our funds. Keeping a large hunk with a broker adds an additional layer of risk. On the other hand, in a regulated environment, I think we’ll see more and more traditional banks getting involved in Forex. Citibank has gotten in and funds are insured.

This is what I’m expecting to see: If other banks follow, we’ll see larger minimum account requirements, but we’ll have better protection. Retail Forex won’t be done, but probably the smallest players will be eliminated. Anyone dedicated and determined enough will be able to scrape up the minimum. This will make the field of participants a little better educated as well. If someone has to actually save or borrow a meaningful stake to open an account, they’ll be more apt to practice conservative MM and will take their account seriously. It may be their only opportunity. Those who continually blow their accounts by over-leveraging and repeatedly refuel by slapping a few hundred on the credit card will be priced out. If they can’t over-leverage, there will be no thrill and they’ll simply lose interest and go away.

Nothing stays the same and we all need to know what our next move is. I’ve started a small non-US account just to have in place in case the US becomes too difficult or the unthinkable happens in October. It may not be the answer, but it might be a crutch. If not, I’ll go back to where I came from--Stocks and mutual funds. The Forex can be a much meaner horse to ride anyway.

Excellent post as always billflet, there's something there for everyone, recommended reading for anyone needing clarity and a balanced unbiased view of this argument!

It really needed top-of-the-page billing so I'll copy&paste it below if that's ok.........




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Originally Posted by billflet

I have to take a little bit of everyone’s side here. First off, I don’t like to see the government involved in anything more than it is already, but significant changes in retail Forex are bound to come. Not too many people know anything about Forex whatsoever. But a lot of people have a vague idea about the definition of leverage and to the non-participant leverage usually conjures up notions of risk. This makes Forex with up to 1000:1 margin accounts an easy target. So there’s that.

And, on top of that, the majority of us get slaughtered so there’s that. Government is anxious to prove that they’re making great strides toward reducing/eliminating risky financial practice. Reducing leverage in a market where most get their arse handed to them is an easy sell. Every other industry has laws and rules and restrictions shoved down their throat and it’s safe to say none of them like it. The airline, trucking, healthcare, auto, logging, and a whole litany of industries with a helluva lot more influence than retail trading has, get hamstrung with redundant rules, and restrictions every day.

I’d like to see the government stay out of it and let the already in place, undeniable axiom of “The Stupid Shall Be Punished” prevail. There is plenty of information available on margin, leverage and risk. But I’ll bet that half of the members of this board can’t quickly tell how much they are leveraged at any given time even though it only takes two numbers to compute it. 10:1 leverage won’t matter to me but, to be fair that doesn’t mean it won’t affect others. I could see a successful grid trader with multiple positions being leveraged higher than that provided his positions aren’t highly correlated.

Disaster for retail Forex on the horizon? If anyone doesn’t know the difference between real leverage and margin based leverage (and I suspect some here don’t) they may be wringing their hands over nothing. A reduction in leverage won’t be the end of retail trading. There are plenty of brokers offering micro and nano lots which aren’t a bad idea anyway if you’re trying to achieve proper granularity in trade size.

I’ve always suggested protecting funds by not putting your whole trading nut in your main trading account. This, to me, is the worst effect of reduced leverage--we’ll be less able to protect our funds. Keeping a large hunk with a broker adds an additional layer of risk. On the other hand, in a regulated environment, I think we’ll see more and more traditional banks getting involved in Forex. Citibank has gotten in and funds are insured.

This is what I’m expecting to see: If other banks follow, we’ll see larger minimum account requirements, but we’ll have better protection. Retail Forex won’t be done, but probably the smallest players will be eliminated. Anyone dedicated and determined enough will be able to scrape up the minimum. This will make the field of participants a little better educated as well. If someone has to actually save or borrow a meaningful stake to open an account, they’ll be more apt to practice conservative MM and will take their account seriously. It may be their only opportunity. Those who continually blow their accounts by over-leveraging and repeatedly refuel by slapping a few hundred on the credit card will be priced out. If they can’t over-leverage, there will be no thrill and they’ll simply lose interest and go away.

Nothing stays the same and we all need to know what our next move is. I’ve started a small non-US account just to have in place in case the US becomes too difficult or the unthinkable happens in October. It may not be the answer, but it might be a crutch. If not, I’ll go back to where I came from--Stocks and mutual funds. The Forex can be a much meaner horse to ride anyway.

Originally Posted by billflet

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Let me see if I can do this all in the same post........!

Fantastic, you finally realize it, there's a glimmer of light at the end of the tunnel!

Oh no, the glimmer faded! Please don't get started on the zero-sum debate, we could be here until next Christmas!

They run it a) to stay competitive in the marketplace, and b) to attract new suckers who want ridiculously high leverage because think they can make a fast buck, I thought that was obvious.

I stopped reading when I got to "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."

I don't think you understood what he said, or my replies. 10:1 leverage was more than enough to trade his example. When he realized that, he tried to move the goalposts and make it 5:1 just to try and prove his point!

'Commission-free', just like 1/2/300:1 leverage, is a sales gimmick, a marketing tool, designed to entice the gullible. Commissions are built into spread, shade, and the brokers business model, there's no free lunch here!

I doubt they will need to, most established brokers have a solid core of consistently profitable traders who trade volume, that's where the money is, not the nickel and dime underfunded overleveraged suckers who last five minutes.

Right, which accounts for you 'only' needing 20:1 leverage.

I think you meant wouldn't need to trade against their clients!

Exactly!

Huh? Sorry, that doesn't actually make any sense!

Ummm, I don't remember telling anyone it's 'good for them'??!!?

I talked to them several times about managed accounts there. They said repeatedly that since they were a bank that they would not have to change their leverage (max 100:1) even if the regs went that way.

It was several months ago - don't know if it was really true then or if it would hold water now, but dat is what de man said.