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Thoughts on 50:1 Leverage

  • #81
  • Sep 3, 2010 2:26am Sep 3, 2010 2:26am
This is NOT designed to help you ( traders ) its to take more control of you daily life. Remember they are much smarter than you & I, so they use that to take away more of your freedom & liberty.

I notice so far no one is saying YES I voted for this administration....I wouldn't admit it either. Jimmy Carter your place in history has just be taken.

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  • #82
  • Sep 3, 2010 3:00am Sep 3, 2010 3:00am
Quoting moneymaker2

As adults, I think that people should be allowed to determine if they can take the risk or can afford to lose the money, not someone else making that decision for them.
That would be fine if all adults were capable of assessing things realistically and making sensible decisions. Don't you think that as responsible adults we should want to protect the vulnerable, less responsible, less capable who are prone to chasing these types of unachievable dreams, especially when it's exactly those types of people who can least afford it?


Quoting moneymaker2

....but it is successful for me, so why not let me have the option to trade that way? Who benefits to turn my returns using high leverage into mediocre returns using low leverage?
Isn't that just a tad selfish? 'I'm ok, to heck with everyone else, it's their problem'. Why not accept a compromise, you'll still make money.

Quoting moneymaker2

I never understood why, if a trader is confident in his/her trading ability, they would NOT want to use the highest leverage possible?
Risk. Do the math yourself.

Quoting moneymaker2

Changing leverage will not keep people from losing their money, just change the time frame they lose it in.
Well that's one plus, there are others which I've already mentioned.

Quoting moneymaker2
I am not sure I understand the comment about "sensible risk parameters"...obviously I am operating with what I consider sensible risk parameters now, but I am confident that many would consider them extreme. So "sensible" is a personal thing, like preferring blonde or brunette....Heck, my idea of a sensible return is at least $2500/week, but just because I wouldn't trade for any less, doesn't mean other people wouldn't be happy with $100/week.....so let everyone trade the way they want for the return they want.
Return, and the risk it took to achieve it are usually expressed in percentages terms rather than dollar amounts. Sensible risk is not necessarily a personal thing. Sure, different people have different risk profiles but there are some basic 'rules' which are universal and to be frank just plain common sense.


Quoting moneymaker2

I am not advocating using high leverage or higher risk or anything that gets people out of their comfort zone....all I am advocating is give people the information on the risks involved and let them make their own decision and not be dictated what to do under the pretense of "protecting them".
Hopefully now they'll be better informed but that still won't stop the people who are only attracted to the potential return and seem to be totally incapable of assessing the risks involved. For them this new legislation will be beneficial, it's those people it was directed at (if legislators motives are to be believed!)
  • #83
  • Sep 3, 2010 4:09am Sep 3, 2010 4:09am
50:1 is more then enough for any style of trading. The only time I would ever need more is when I would to keep a smaller amount of my capital in the actual account. For instance, I'd rather have 5-10k in the account with the broker and be able to trade 1-2M using 100-200:1 leverage, but still the risk is controlled as 5-10k is only 5% of my trading capital. But if your under capitalized and using high leverage like that, you'll be toast sooner then later I am sure.

Maybe these brokers using high leverage as marketing tactics helped ruin it...
  • #84
  • Sep 3, 2010 5:32am Sep 3, 2010 5:32am
Dont be happy for this 50:1 leverage, because next target for the CFTC will be 25:1 leverage for you ! What would it be if the CFTC ask for comments about leverage reduction to 50:1 in January this year? Yeah you got it.. lot of negative comments. That is why CFTC made an public opinion about reducion to 10:1. (What a joke) So Noobs think Ooohh CFTC listen to us, we dont get a leverage reduction.. lol..

And now.. a surprise reduction to 50:1. Where are the public comments??

Dude dont you get it? This is a victory for the US brokers thus not for the consumers. Many retail noobs traders here are soo blind.. -.-

Let me explain why... with 50:1 leverage, people will deposit more money into their brokers. This means the consumption spending in this sector will go up! The brokers maximum gain will also go up..

Look: 99% traders will go broke. lets say your deposit is 135 is for 100:1. Now it is 270. Soo If you now go broke, brokers get your $270. More income for them.. And.. another important thing: Traders stay longer in this game, brokers like that.. Lesser volatility in their income revenue.

Now.. US traders cannot go overseas lol. Another victory for the brokers.. US brokers wont go broke, because of this rule. It is called Protection. Where is the free market???

I like the 100:1 leverage, because you have the flexibility to control your risk, portfolio management. It is not that I am so stupid and use 80-90:1 leverage.

If the CFTC cannot protect the traders funds in Forex like futures and stocks, then there is something wrong in this industry..
  • #85
  • Sep 3, 2010 5:55am Sep 3, 2010 5:55am
I am very happy with 50:1 leverage and have been for awhile now, I'd be ok with 25:1 too.

I don't care about newbie traders or the "99%" that will go broke, how much money they win or lose or how much they deposit into there accounts for the bad guys to steal.

The new leverage rule is not that bad, in fact I think it's good. I don't see any need for 100:1 leverage to control risk, control risk by learning how to trade, knowing how much to trade with, and when.

Not to say I don't like the idea of 100:1 being available to me, I do think 100:1 was good to have for reasons I mentioned, but... not needed.
  • #86
  • Edited 8:33am Sep 3, 2010 8:32am | Edited 8:33am
I have thought about it and agree....lowering the leverage WILL stop people from losing money in currency trading. With max leverage being cut in half, that means there will be twice as many people making extra income from trading, and that is great news! I was a fool to think that I should be allowed to choose what is best for me when there are so many others more qualified to determine what I should be doing for my own good. My paradigm has been recalibrated, so please accept my apology for being arrogant like that.

I was wrong to be trading full lots and making so much money with 400:1, when the Rules of Forex trading clearly states that "...No Individual should go against the status quo by trading in a manner as to make more money than average or use a method deemed inappropriate by a group of random traders you do not know. If an individual is found to be non-compliant with this rule, they shall be forced to trade like the status quo, up to and including micro lots. This prevents any one trader having to admit that there are others that are successful in certain aspects of trading while they themselves are unable to reach that point...."

I would like to stay and discuss this more, but I saw some fat people coming out of Pizza Hut last night, and since they can obviously not make the right decisions concerning a healthy diet, I have formed a petition to have Pizza Hut shut down. And can you believe they all got into SUVs? S..U..Vs...clearly they should be in an economical 4-door like I drive, but I'll help them with that as soon as I keep them from killing themselves with pizza...

BTW: I am proud to say I made nearly three dollars trading the news today. Those micro lots Do add up!!....
  • #87
  • Sep 3, 2010 8:52am Sep 3, 2010 8:52am
Quoting User112
Dont be happy for this 50:1 leverage, because next target for the CFTC will be 25:1 leverage for you ! What would it be if the CFTC ask for comments about leverage reduction to 50:1 in January this year? Yeah you got it.. lot of negative comments. That is why CFTC made an public opinion about reducion to 10:1. (What a joke) So Noobs think Ooohh CFTC listen to us, we dont get a leverage reduction.. lol..

And now.. a surprise reduction to 50:1. Where are the public comments??

Dude dont you get it? This is a victory for the US brokers thus not...
If the CFTC really wanted to protect people, they would get rid of all dealing desk brokers who use technology to trade against their clients, use stop hunting spikes, make sure orders aren't filled in fast moving markets. These tactics set up the client to lose. They should require all brokers to use DMA or ECN models. I used to be a victim of bad fills and order delays untill I went with my current broker who has executed all my orders flawlessly, even at extremely volatile times. This shady bucket shop nonsense is what's wrong with forex, not the leverage.
  • #88
  • Sep 3, 2010 9:39am Sep 3, 2010 9:39am
It's almost impossible to reach a agreement that how much leverage is right for trading. It's a crazy world, you never know what the other guys capable of doing. But most of us do like keep our options open, don't we?

There's huge difference between the leverage used in individual trades and the leverage used in a whole account. I use 100:1, 50:1 and 200:1 for individual trades with different brokers, but I keep my overall leverage around 7:1 for every account. As long as you take care of the overall leverage, you shouldn't be too concerned about how much leverage provided for individual trades, because the margin calculation is based on all positions combined.

The more leverage you have with a broker, the more buffer you'll have against a margin call, you'll sleep better. As long as you keep the overall leverage unchanged, and that's entirely up to you.

I still believe the priority is we need a trader's organization to voice our concerns. Even some of us are satisfied with current compromise, we'll never know what will happen next, the rules clearly states that the NFA will be able to modify the leverage as it sees fit in the future. Since it's capped at 50:1, it'll only have one direction to go, lower.

If we set beside the disagreement on the leverage issue, we still need to work as one to push some real benefiting reforms such as segregated accounts and capital insurance.

  • #89
  • Edited 1:25pm Sep 3, 2010 9:49am | Edited 1:25pm
The Farm Bill drew blood; Dodd-Frank inserted the knife to the hilt; and future (in 18 mos.) SEC regs re. Dodd-Frank secs. 292B(?) and 292Y (EXTRATERRITORIALITY) will apply the necessary torsional force.

I can see no reason why the current regs should not be considered "acting in restraint of free trade" in accordance with longstanding anti-monopoly laws:

The 2007 $5,000,000 minimum reserve requirement for FX brokers drove a lot of them out of business. (One where I had an account, Chicago based Velocity4x, were know for being very proper in their dealings with clients incl. lightening execution, until they couldn't raize the 5M and were sold to Gain Cap. who seeing the advantages of MetaTrader4 proceeded to turn it into a bucket shop: re-quote, re-quote, re-quote, ad infinitum.)

I understand there are now 14 actual fx brokers in the US besides the big banks who are still allowed to offer 100:1 leverage. Of course THEY don't supply a price feed and you need to get that from Bloomburg. (or was it Dow-Jones)

The new $20,000,000 requirement plus addl. reserves according to open positions should drive down at least a few more. And the remaining traditional brokers fein happiness since it ellimates their competion, and has allowd the known crooks FXCM (though they've probably improved by now) allias REFCO (see http://en.wikipedia.org/wiki/Refco) to engage in still more acquisitions.)

It seems the added reserves should be ample for keeping fx brokers on a failsafe track, but notice Canada and Switzerland implemented laws where government covers the cost of refunds in the event of failure many years ago, and I believe Swiss brokers still offer 400:1.

It remains to be seen whether England's FSA is next to "get on board". One thing's certain: retail forex has exactly Zero effect on currency prices, and a trader can be judged by how well he manages to be in sinc with collusion of Big Banks and Bigger Central Banks, notably on the first Friday of every month.

Do you suppose CFTC or someone will consider regulating Goldman Sachs' "high frequency" (read different price feed) trading widely believed to have caused the "Flash Crash" on the very day Congress took up Dodd-Frank?

I doubt it.
  • #90
  • Sep 3, 2010 9:53am Sep 3, 2010 9:53am
Quoting damagedv1
If the CFTC really wanted to protect people, they would get rid of all dealing desk brokers who use technology to trade against their clients, use stop hunting spikes, make sure orders aren't filled in fast moving markets. These tactics set up the client to lose. They should require all brokers to use DMA or ECN models. I used to be a victim of bad fills and order delays untill I went with my current broker who has executed all my orders flawlessly, even at extremely volatile times. This shady bucket shop nonsense is what's wrong with forex, not...

Dealers need to trade against there clients, they offer you liquidity. Someone has to take the other side of your trade don't they? With an ECN in some cases it's not your broker directly, but someone is. If you're getting bad execution that is one thing, definitely change your broker... you should be getting fair execution.

Someone who is complaining about making so much money with 400:1, I would think so much money would be able to land you an account with at least tier 2 PB? There, you won't be getting over 100:1... more likely 50:1... and with a prime broker even less.

The people who are complaining about not being able to trade with huge leverage are pikers and dreamers.
  • #91
  • Sep 3, 2010 10:41am Sep 3, 2010 10:41am
Quoting Monroe
The people who are complaining about not being able to trade with huge leverage are pikers and dreamers.
So what is it to others if some traders are pikers (I have no idea what that is, but I assume it is a derogatory term) and dreamers? Who has the right to determine that there should be no dreamers trading currency?

What if those same people decided to save a larger group of traders from themselves and do away with micro and mini lots? That has no affect on me, but you can bet I would be voicing my opinion that traders should be able to make that choice themselves.

People are missing the point...it is not about the amount of leverage, it is about the CHOICE of the amount of leverage. I think the complacency of people when it comes to the goverment "saving us from ourselves" is a bad thing....once things are put in place, it is next to impossible to get them recended.

And stop with the name calling....what in the world is up with that?
  • #92
  • Sep 3, 2010 10:52am Sep 3, 2010 10:52am
Quoting Monroe
Dealers need to trade against there clients, they offer you liquidity. Someone has to take the other side of your trade don't they? With an ECN in some cases it's not your broker directly, but someone is. If you're getting bad execution that is one thing, definitely change your broker... you should be getting fair execution.

Someone who is complaining about making so much money with 400:1, I would think so much money would be able to land you an account with at least tier 2 PB? There, you won't be getting over 100:1... more likely 50:1... and...
I'm not complaining. I have a 100k account with a DMA broker. I have flawless execution...but having been with other brokers. I know the tricks they play. I can assure you, no one at my broker trades against me and I can get fills on 10 lots of euro/yen making a massive news spike in under a second. Try that with a dealing desk broker.
  • #93
  • Sep 3, 2010 10:59am Sep 3, 2010 10:59am
Moneymaker2, I am not name calling... look up what it means, wasn't meant to hurt anyone's feelings.

I hear your argument, but... the ridiculous amount of leverage is unnecessary. I don't think anyone should complain about there choices being taken away, as it was never there choice to begin with how much leverage they receive. It wasn't that long ago when your right to trade forex as a small fish was even possible.
  • #94
  • Edited 11:12am Sep 3, 2010 11:00am | Edited 11:12am
Quoting damagedv1
I'm not complaining. I have a 100k account with a DMA broker. I have flawless execution...but having been with other brokers. I know the tricks they play. I can assure you, no one at my broker trades against me and I can get fills on 10 lots of euro/yen making a massive news spike in under a second. Try that with a dealing desk broker.
That wasn't directed at you damage. only the first paragraph.

I know your execution may be great and your broker is not trading against you, but who is the counterparty? someone surely is. Your not getting a prime broker account with 100k so someone is putting credit on the line for you, and someone is the counterparty who always has last look on your orders. Your not trading anonymous, unless your on EBS? BTW I have not seen any DMA brokers offering half decent commissions, they all rape there clients as far as I can tell, if you know of one, I would surely like to know.

What tricks are you reffering to, off market pricing and stop hunting? they don't trade against a person directly, I am not sure what there models are, but I would think it's that they are hedging there risk as a whole, not stop hunting little fish personally. They clear books during illiquid times.

Not sure why you would trade 10 lots of EJ when you can trade much higher volume on EU or UJ and be in and out quicker with such amazing execution.
  • #95
  • Sep 3, 2010 11:04am Sep 3, 2010 11:04am
Quoting Monroe
That wasn't directed at you damage. only the first paragraph.
No problem, my point is there are far more factors in the Forex Industry that set up clients for failure rather than leverage and I think if the Powers that be were serious about protecting consumers, they would adress those things as well. Why even play Forex, when most of the times it's setup so the House always wins? Go to Vegas instead.
  • #96
  • Sep 3, 2010 11:16am Sep 3, 2010 11:16am
Quoting damagedv1
No problem, my point is there are far more factors in the Forex Industry that set up clients for failure rather than leverage and I think if the Powers that be were serious about protecting consumers, they would adress those things as well. Why even play Forex, when most of the times it's setup so the House always wins? Go to Vegas instead.
I agree with you here. But... You can surely beat the house in this game more then a few ways. They should start by banning all indicators and make in mandatory that all people should learn the structure of the market, all markets. You should have to get a license to trade forex. That's what I think.
  • #97
  • Sep 3, 2010 11:18am Sep 3, 2010 11:18am
Quoting Monroe
Moneymaker2, I am not name calling... look up what it means, wasn't meant to hurt anyone's feelings.

I hear your argument, but... the ridiculous amount of leverage is unnecessary. I don't think anyone should complain about there choices being taken away, as it was never there choice to begin with how much leverage they receive. It wasn't that long ago when your right to trade forex as a small fish was even possible.
My mistake, it is not as bad of a term as I thought. But actually it was a choice....a year ago I could get 400:1 with GFT.....then it was 100:1...and in another month and a half, it will be 50:1. During each of those times, those leverage amounts were available, but it was my choice to use it or not. Now my choice is limited. I swithced to a broker in the UK that still offered 400:1, but soon that will be a thing of the past, too.

Of course that amount of leverage in unnecessary, but it helped me to make a lot of money in a short period of time. So for that to be taken away is near and dear to my heart (and wallet). I have the funds to trade 10:1 if necessary, but I would much rather use my money to my biggest advantage, and that is the buying power of high leverage. The whole reason I trade is to make as much money as I can, so anything that affects that I am concerned with...taxes, leverage, lot size, anything.

We are just going to have to agree to disagree, as the autopsy report has came back on the horse and majority of the beating marks have been confirmed to be post-mortum.

Good trading....
  • #98
  • Sep 3, 2010 11:24am Sep 3, 2010 11:24am
Fair enough moneymaker2. I agree... it is kind of messed up what is going on, mostly the part about not being able to go offshore... thats what I really don't like, but I guess they had to do that as brokers wouldn't go out of business here in the states. And btw, is that surely a fact? We cannot use European brokers for sure??

I would like to use more leverage and keep less money in the account. One of the greatest things about forex was the leverage which made up for the accounts not being as safe as centralized markets IMO. But I think people were just being idiots with it.
  • #99
  • Sep 3, 2010 11:36am Sep 3, 2010 11:36am
Quoting Monroe
I agree with you here. But... You can surely beat the house in this game more then a few ways. They should start by banning all indicators and make in mandatory that all people should learn the structure of the market, all markets. You should have to get a license to trade forex. That's what I think.
Good points...but then what would all the Forex Forum guys do that want to try 100's of Forum strategies for decades on paper accounts and micro-minis, in their never ending quest for The Holy Grail? What would they have to live for without their journey for the Majick Indicator? Your idea is just too inhumane!
  • #100
  • Edited 1:21pm Sep 3, 2010 11:41am | Edited 1:21pm
Quoting pipmutt
That's what I can't understand, it seems like such an obvious issue yet they continue to avoid it. Strange.

Perhaps there's some fundamental reason why currencies can't be insured but what that could be escapes me. If no insurance is available maybe the industry as a whole should be obliged to set up an 'emergency' fund for if/when one of their members goes into liquidation. Other industries have similar setups, why not this one?

I should have mentioned this in post 89 but truthfully didn't think of it until I saw pipmutt's post 47:

The idea that the purpose of this thing is to protect us from ourselves is only what they want us to think. Killing a number of standard type fx brokers serves only the one purpose of ongoing elitist money consolidation, which is really taking off now. Of course an emergency fund like pipmutt describes would solve the problem of broke brokers completely, but that's not what they're trying to do.

The elimination and consolidation of standard type fx brokers and diversion of business to the Big Banks helps to make certain that the same Modern Day Robber Barons will gain complete control over world finance. Note there's nothing in Dodd-Frank that addesses the incipid High-Frequency trading a la Goldman Sachs for which the "Flash Crash" on the day Congress took up Dodd-Frank is blamed, or anything about preventing uninsured tranched instrument (or Consolidated Debt Obligations, or whatever) rollover panic, that caused the toxic carnage of 2008 in the first place. (not that I've actually read the limitless document.)

You can forget about you're $25 micro-mini acct. (and believe me the price feed will cost more than $25.) But do you see them addressing situations like my Gain Capital account, suggested at that time for beginners, with the pretty much suggested ("Start Trading With $250!!") min. opening balance of $250 where the smallest trade you could make was .10 ? Of course not. (This despite my vehement written criticism of 2008... heh, heh) There's no mention of accounts with too small min. bal. versus too big min. trade, and that's how people loose all their money.

Still forex trading has a defined risk: The most you can lose is your account balance. So what's the big deal? I'd like to sell some naked Calls on the DOW. Oh well!
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