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Thoughts on 50:1 Leverage

  • #21
  • Sep 1, 2010 3:46pm Sep 1, 2010 3:46pm
And maybe this is why it will always be a "merry-go-round".

“The shepherd drives the wolf from the sheep's throat, for which the sheep thanks the shepherd as his liberator, while the wolf denounces him for the same act as the destroyer of liberty. “ Abraham Lincoln
  • #22
  • Sep 1, 2010 3:48pm Sep 1, 2010 3:48pm
Quoting Forexia
Well, at least this time, when they were trying to make the cage smaller again, we growled, gravelled, begged, yelled, bit, kicked, lunged, shouted, barked, mobilized other cats and dogs, and bared out teeth enough that when they were finally putting the steel rods together, they made the cage bigger than what they originally designed it.

Oh, what is that? Sniff, sniff... That's food! Better get my teeth on it before other dogs...

.......and yes Forexia, you certainly seem to have won the battle.

Congratulations.
  • #23
  • Sep 1, 2010 4:03pm Sep 1, 2010 4:03pm
Quoting damagedv1

But for people who trade 10 standard lots and up and know how to Lot leverage and make a few pips a day with great scalping skills, this proposal will definitely limit their income.
It might reduce their return percentage, sure, but if they want to maintain a similar level of income then it's simple enough, all they need to do is increase trading equity to cover their brökers additional margin requirement. If they're trading "10 standard lots and up" and have "great scalping skills" then that really shouldn't present any problem should it? I guess they're just going to have to settle for realistic returns.

We've already heard from one major bröker that the majority of their clients don't use in excess of 50:1 anyway so it seems like only a minority will be affected.


This topic has been beaten to death in other threads, it's pointless prolonging the agony in yet another thread!

So unless there's anything new.....
  • #24
  • Sep 1, 2010 4:15pm Sep 1, 2010 4:15pm
Quoting damagedv1
Please explain to me how you would make any real money with a couple of $100 to trade and 10 to 1 leverage. I seriously doubt it could be done. Lets face it, for the vast majority of these guys that spend endless years testing every "system" on their micro-mini lots, the leverage won't matter. They will never make any money anyways. But for people who trade 10 standard lots and up and know how to Lot leverage and make a few pips a day with great scalping skills, this proposal will definitely limit their income.
Yes, their income got cut effectively by half and that is assuming they are trading "major currencies". If they happen to be trading "non-major currencies", their income will be cut by five times.

I have illustrated this with calculations in the thread started by pipmutt titled "US customer ca no longer have accounts overseas", if anybody wants to see it.
Make your losses in demo. Earn your profits live.
  • #25
  • Sep 1, 2010 4:16pm Sep 1, 2010 4:16pm
Quoting TradeRunner
.......and yes Forexia, you certainly seem to have won the battle.

Congratulations.
No, we have won the battle, a partial one, yes. Now we need to fight for the food.
Make your losses in demo. Earn your profits live.
  • #26
  • Sep 1, 2010 4:18pm Sep 1, 2010 4:18pm
Quoting pipmutt
It might reduce their return percentage, sure, but if they want to maintain a similar level of income then it's simple enough, all they need to do is increase trading equity to cover their brökers additional margin requirement. If they're trading "10 standard lots and up" and have "great scalping skills" then that really shouldn't present any problem should it? I guess they're just going to have to settle for realistic returns.

We've already heard from one major bröker that the majority of their clients don't use in excess of...
Well, look at it this way. If I were using my "great scalping skills" to produce a few thousand dollars a week income and that money was used to pay living expenses, then it's an issue. Let's say I couldn't put additional funds into a trading account and I can't build up my equity since I'm withdrawing all the profits. Now I will have to put up $20,000 per trade instead of $10,000. So I guess I would be one of the minority that's affected. And to now say that traders are forbidden to open up overseas accounts is another blow to Freedom. Of course this is starting to look like a page from the Chavez playbook, whom I'm sure Obama admires.
  • #27
  • Sep 1, 2010 5:03pm Sep 1, 2010 5:03pm
Last year I moved my account to London from the US. I suggest everyone do the same thing to avoid these headaches. I find trading takes all my concentration and have little time left for looking over my shoulder for Obama and his friends at the CFTC.

Pipmutt, funny posts!
  • #28
  • Sep 1, 2010 5:21pm Sep 1, 2010 5:21pm
Quoting GEfx
Last year I moved my account to London from the US. I suggest everyone do the same thing to avoid these headaches. I find trading takes all my concentration and have little time left for looking over my shoulder for Obama and his friends at the CFTC.

Pipmutt, funny posts!
Nice move and good trading to you! Really hope the Dodd-Frank doesn't get you either with their "extraterritorial" powers, honestly.
Make your losses in demo. Earn your profits live.
  • #29
  • Sep 1, 2010 5:39pm Sep 1, 2010 5:39pm
Quoting damagedv1

Let's say I couldn't put additional funds into a trading account and I can't build up my equity since I'm withdrawing all the profits. Now I will have to put up $20,000 per trade instead of $10,000.
Oh no, really! So that's what now, somehow the governments problem that you can't afford it? They decided, for whatever reason, to reduce the amount of leverage brokers can offer clients, and funny enough brokers agree with the 50:1 decision! That's their prerogative, they're not obliged to offer you any leverage, it's not your right to have it, it's a privilege.

This is the problem today, everyone thinks they have a God given right to everything and if they don't get it they complain about the injustice of it all.

Why not appreciate what you have got? You can trade in (a derivative of) a market which was once the preserved domain of institutions and a few select high net worth individuals, and you can do this with practically no investment capital! Isn't that great! What a great opportunity!

Quoting damagedv1

And to now say that traders are forbidden to open up overseas accounts is another blow to Freedom.
I'm not sure that's been finalized has it?


By the way don't take this post personally, I'm not meaning to single you out.
  • #30
  • Sep 1, 2010 5:44pm Sep 1, 2010 5:44pm
Quoting GEfx

Last year I moved my account to London from the US. I suggest everyone do the same thing to avoid these headaches. I find trading takes all my concentration and have little time left for looking over my shoulder for Obama and his friends at the CFTC.

Pipmutt, funny posts!


There you go, there's ways around everything, and you got up and did something about it!

I guess we swapped places, I moved mine to the US because of the CFTC/NFA rules (the one last year about reversing trades, best thing since sliced bread as far as I'm concerned!)
  • #31
  • Sep 1, 2010 9:13pm Sep 1, 2010 9:13pm
Quoting pipmutt
Good point, as I say they need to appreciate the freedoms they do have.

I think the problem is they've been allowed to stay up past their bedtime way too often, they're spoiled.

Without doubt there should have been these types of regulations right from the start, if there had been we wouldn't be having this discussion, people would just be happy to have the opportunity to trade micro accounts with pocket change.

50:1 is still a formidable amount of leveraging power to have. In my opinion if people can't achieve profitability...


It wasn't that long ago that you needed 25-50K to open a currency trading account. Now it's the Wild West. 50:1 is adequate for someone with small capital to trade with. It is also great for someone with major capital to allocate a small percentage with a broker to gamble with.

At 10:1, while still ok for someone with limited funds, I would do all my currency trading in my futures account. The main reason being safety of funds.
  • #32
  • Sep 1, 2010 9:29pm Sep 1, 2010 9:29pm
Quoting damagedv1
Please explain to me how you would make any real money with a couple of $100 to trade and 10 to 1 leverage. I seriously doubt it could be done. Lets face it, for the vast majority of these guys that spend endless years testing every "system" on their micro-mini lots, the leverage won't matter. They will never make any money anyways. But for people who trade 10 standard lots and up and know how to Lot leverage and make a few pips a day with great scalping skills, this proposal will definitely limit their income.


Maybe the scalpers should form a union and lobby for some stimulus money.
  • #33
  • Sep 2, 2010 2:57am Sep 2, 2010 2:57am
Quoting deuce

I would do all my currency trading in my futures account. The main reason being safety of funds.
I'm surprised they didn't address that issue in this last round of reforms.

Quoting deuce

Maybe the scalpers should form a union and lobby for some stimulus money.
lol
  • #34
  • Sep 2, 2010 9:09am Sep 2, 2010 9:09am
50:1 is still 2% margin and incredible leverage and for the exotics it will be 20:1 or 5%. Think about this $20,000 to control $1,000,000 or in the case of exotics 50K. Try getting a million dollar loan with 5% down in this environment.... Not going to happen.

The more important features of the CFTC rulings are designed for you the trader and for hopes of making the FX industry regulated and safer. Now in the US all those who solicit orders, exercise discretionary trading authority and operate pools with respect to FX transactions will need to be registered. Meaning they will need to pass the series 3 and series 34 exam. They will be fingerprinted, undergo background checks with the FBI. How can that be bad for the forex trader?
The FCMs or the RFEDs will have minimum capital requirements. Smaller IBs will need to be under the umbrella of an FCM or RFED. So now FX firms will have requirements to be met such as Disclosure, Recordkeeping, Capital and margin, Reporting, Business Conduct and Documentation. So apart from going from 100:1 to 50:1 how does this hurt the FX trader??? So yes I am commending the fact that now those legitimate firms who have been trying to do Forex Business on a legitimate basis now do not have to deal with those who did not hold themselves to the same standards at least in the USA.
  • #35
  • Sep 2, 2010 9:16am Sep 2, 2010 9:16am
Thank you for contacting me regarding H.R. 4173, the Restoring American Financial Stability Act. I appreciate hearing your opinions on this legislation.

On June 30, 2010, I had the opportunity to vote on H.R. 4173. While this legislation is supposed to fix the problems which created the economic recession we are currently in and is supposed to prevent future crises from occurring, this 2,300 page piece of legislation represents the most aggressive expansion of government control over our economy since the Great Depression. One of the most egregious problems with this legislation is that it does not address Fannie Mae and Freddie Mac. The Congressional Budget Office predicts Fannie Mae and Freddie Mac will ultimately cost taxpayers $380 billion (they have already cost taxpayers $145 billion) and the federal government guarantees more than $1.7 trillion of their debt.

While we can certainly point to specific failures by past regulators, fraud in the mortgage industry and the collapse of real estate prices as some of the driving forces of our current recession – considering Fannie and Freddie hold more than $400 billion dollars worth of mortgage liability today, it is difficult to reconcile why a financial regulatory reform bill that was created to solve the issue of subprime mortgages would not have language addressing the two biggest holders of mortgage notes.

This legislation also would create a Consumer Financial Protection Bureau. This new bureaucracy will have very broad regulatory authority to issue regulations in order to bypass the legislative process.

The reality is we aren't really improving the regulatory system with this legislation. What we are doing is institutionalizing a culture of bailouts and free passes for bad actors by handing over unprecedented power to unelected bureaucrats. If this legislation becomes law, the newly created Financial Stability Oversight Council will have the power to break-up or bailout financial firms without any directive from Congress or the President.

As job growth remains stagnant and the American economy struggles to recover, I understand the desire of some to forcefully respond with new regulations in an attempt to prevent a similar situation from occurring in the future. But it is fundamentally important that regulatory efforts do not hold back the innovative capacity of the American economy. Unfortunately, this legislation does just that. I support options that put personal responsibility back into the market, ending the era of taxpayer funded bailouts and government bureaucrats picking winners and losers.

Before the House voted on H.R. 4173, Republicans introduced a Motion to Recommit which would have ensured a robust and comprehensive audit of the Federal Reserve which was not included in the legislation. Congressman Ron Paul (R-Texas) introduced a standalone bill which would audit the Federal Reserve and it has received broad bipartisan support by garnering 320 co-sponsors. Despite the broad support the standalone bill has received, the Motion to Recommit failed and only a very weak provision was included in final passage.

Ultimately, because I support options that put personal responsibility back into the financial market, ending the era of taxpayer funded bailouts and government bureaucrats picking winners and losers, I voted against H.R. 4173. Unfortunately, the Senate passed this legislation as well and on July 21, 2010, President Obama signed H.R. 4173 into law.

Again, thank you for taking the time to contact me. I appreciate having the opportunity to represent you in the U.S. House of Representatives. Please feel free to visit my website (www.house.gov/burgess) or contact me with any future concerns.

Sincerely,

Michael C. Burgess, M.D.
Member of Congress
  • #36
  • Sep 2, 2010 9:21am Sep 2, 2010 9:21am
Quoting PFGBest FX
50:1 is still 2% margin and incredible leverage and for the exotics it will be 20:1 or 5%. Think about this $20,000 to control $1,000,000 or in the case of exotics 50K. Try getting a million dollar loan with 5% down in this environment.... Not going to happen....
It's about the freedom's you are slowly losing. They are slowly and systematically taking away freedoms from sectors that only a minority cares about and moving onto the the next one. No one cares or does anything until their number gets called and it touches on a sensitive issue. But, when it is sensitive to you unfortunately you are in the minority and there isn't enough of you protect that freedom. The Republic was established to protect the freedoms of the minority where Democracy had failed. Anyways...you'll see what I mean when they touch something actually sensitive to you and no one else seems to care. It's a calculated approach.

On another note. I recommend you diversify into trading Futures and stocks because Forex is quickly losing its advantage over other asset classes.
  • #37
  • Sep 2, 2010 9:29am Sep 2, 2010 9:29am
Quoting Maxsmart
It's about the freedom's you are slowly losing. They are slowly and systematically taking away freedoms from sectors that only a minority cares about and moving onto the the next one. No one cares or does anything until their number gets called and it touches on a sensitive issue. But, when it is sensitive to you unfortunately you are in the minority and there isn't enough of you protect that freedom....
FX margin is still better than futures margin on the Euro Futures E7. on a 125,000 Eur contract the margin that is most current is $4,050 which equates to 3.24%. The EUR/USD is 2%. But, I will concur that diversification is always in a person's best interest.
  • #38
  • Sep 2, 2010 9:37am Sep 2, 2010 9:37am
Quoting PFGBest FX
FX margin is still better than futures margin on the Euro Futures E7. on a 125,000 Eur contract the margin that is most current is $4,050 which equates to 3.24%. The EUR/USD is 2%. But, I will concur that diversification is always in a person's best interest.
I think the leverage is still extremely high right now PFGBest FX. I only trade with 1:10 leverage but I also employ option strategies to manage risk. I am saying if we follow the trajectory. 1:10 and possibly below leverage is most likely inevitable and at that time Forex will be uncompetitive. I think that is the trajectory. I think that there will be much better investment opportunities or at least investment opportunities that are about the same.
  • #39
  • Sep 2, 2010 9:51am Sep 2, 2010 9:51am
Quoting PFGBest FX
The more important features of the CFTC rulings are designed for you the trader and for hopes of making the FX industry regulated and safer. Now in the US all those who solicit orders, exercise discretionary trading authority and operate pools with respect to FX transactions will need to be registered. Meaning they will need to pass the series 3 and series 34 exam. They will be fingerprinted, undergo background checks with the FBI. How can that be bad for the forex trader?
Excellent points, the other protections this new legislation offers seem to have been overlooked, everyone's focusing on leverage. In the past year or two we've come a long way in terms of regulation, transparency, and safety especially when you consider the nature of the 'market' we're trading. It's not spot, it's not futures, it's a kind of obscure concoction!

I would have liked to have seen something addressing protection of deposited funds though, for both domestic and overseas clients of US brökers, do you think there's any reason why they didn't include that or at least consider it?
  • #40
  • Sep 2, 2010 10:05am Sep 2, 2010 10:05am
To day-trade one euro futures contract {6e} @ $125,000 the margin is $500.
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