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Leverage Reduction: First USA now Japan. Who's next?

  • #1
  • First Post: Oct 3, 2010 11:14am Oct 3, 2010 11:14am
Hello everyone,

Japan is the latest to follow the US Govt on lowering leverage.
For traders from Japan I suggest you take a look at the info at this
link http://blogs.fxstreet.com/francesc/2...n-the-horizon/

It is only a matter of time before any retail trader will be very restricted in trading the forex market from a western government.

Regards,
Jeff
  • #2
  • Oct 3, 2010 11:28am Oct 3, 2010 11:28am
My god, how will the Japanese traders survive with only 50:1 leverage !?
Measure twice, cut once
  • #3
  • Oct 3, 2010 12:37pm Oct 3, 2010 12:37pm
Quoting aediaz1
My god, how will the Japanese traders survive with only 50:1 leverage !?
LOL
  • #4
  • Oct 3, 2010 12:39pm Oct 3, 2010 12:39pm
Quoting azjeff
Hello everyone,

Japan is the latest to follow the US Govt on lowering leverage.
For traders from Japan I suggest you take a look at the info at this
link http://blogs.fxstreet.com/francesc/2...n-the-horizon/

It...
Its like this ...

The world is blaming the worlds financial crisis on Speculators. US and Japan is the beginning. When other countries see how 'successful' lower leverage works for the countries interest, we'll see many other countries jump board. I suspect, 2011 will be very interesting for European traders.
  • #5
  • Oct 3, 2010 3:42pm Oct 3, 2010 3:42pm
Quoting aediaz1
My god, how will the Japanese traders survive with only 50:1 leverage !?
I thought they were taking it to 25:1 within two years?
  • #6
  • Oct 3, 2010 3:58pm Oct 3, 2010 3:58pm
I think that a leverage of 50:1 is high enough - for blowing up your acc or also for doubling it
Pecunia non olet
  • #7
  • Oct 3, 2010 4:11pm Oct 3, 2010 4:11pm
The leverage will be 25 to 1 in Japan next year. See below link. For the people that think these restrictions are not going to affect them they are in for a big surprise as these changes are just the start of the changes to come. The US started it. Japan was next to make changes and more are to come. We will see how much people will be laughing when these changes and future changes affect them.

http://www.forexcrunch.com/forex-lev...ders-run-away/

Regards,
Jeff

Quoting stljeffbb
I thought they were taking it to 25:1 within two years?
  • #8
  • Oct 3, 2010 4:32pm Oct 3, 2010 4:32pm
Quoting wm-eu
I think that a leverage of 50:1 is high enough - for blowing up your acc or also for doubling it
50:1 is hardly the problem for anyone. The problem lies in the bigger picture of where this is going.

25:1 may be next (this is already the case for Japan), and then who knows. Before you know it, 10:1 or even 1:1 could be the worldwide rule.

That should be the real concern, not 50:1. Unless of course you're so rich (i.e. your capital is so big) that you are more than happy with 10-20% return per year.

I tend to be more of a progressive/democrat in my views. I hate to say this, but things like this make me prefer republicans. lol
  • #9
  • Oct 3, 2010 5:12pm Oct 3, 2010 5:12pm
If traders want this to stop, you should vote republican.

I use to assume all traders were republicans. Surprised at high many traders are not repubs. How can traders not side with the one political party thats pro-capitalism. I remember reading a thread once, where a trader said he's against capitalism but trades forex full time. All I can do was shake my head in disgust.

As I said before, 50:1 wouldn't have made it by a long shot if repubs were in office. The bill was written by dems, presented by dems, and signed into law by a dem.

Need I say more.
  • #10
  • Oct 3, 2010 8:29pm Oct 3, 2010 8:29pm
Quoting wm-eu
I think that a leverage of 50:1 is high enough - for blowing up your acc or also for doubling it
For a single trade, yes; but what about multiple positions which you're holding for several weeks and adding as they move?
  • #11
  • Oct 3, 2010 9:14pm Oct 3, 2010 9:14pm
Quoting Jhig
I remember reading a thread once, where a trader said he's against capitalism but trades forex full time. All I can do was shake my head in disgust.
I would at least ask him if he gave away most of his money, or to define capitalism, and suss out whether he can actually trade.

Quote
The world is blaming the worlds financial crisis on Speculators

To be fair, most are believing it, rather than suggesting it.
  • #12
  • Oct 4, 2010 12:08pm Oct 4, 2010 12:08pm
Quoting Marv
50:1 is hardly the problem for anyone. The problem lies in the bigger picture of where this is going.

25:1 may be next (this is already the case for Japan), and then who knows. Before you know it, 10:1 or even 1:1 could be the worldwide rule.

That should be the real concern, not 50:1. Unless of course you're so rich (i.e. your capital is so big) that you are more than happy with 10-20% return per year.

I tend to be more of a progressive/democrat in my views. I hate to say this, but things like this make me prefer republicans. lol...
I would be really happy if i would make 10-20 % return p.a. with my whole capital.

10:1 would be really horrible - but i'm pretty sure that, if that really happens, some brokers will open a outpost in a i irregulated country (like malta, ecc.)

btw. right now the leverage on the fx futures is around 30:1
Pecunia non olet
  • #13
  • Oct 4, 2010 12:24pm Oct 4, 2010 12:24pm
Greentrader has another article up on being able to trade with foreign banks till next year. Also more importantly read around the middle of the page where it says that if REPUBLICANS take back control of congress they may be able to reverse some of this crap.


Quoting Jhig
If traders want this to stop, you should vote republican.

I use to assume all traders were republicans. Surprised at high many traders are not repubs. How can traders not side with the one political party thats pro-capitalism. I remember reading a thread once, where a trader said he's against capitalism but trades forex full time. All I can do was shake my head in disgust.

As I said before, 50:1 wouldn't have made it by a long shot if repubs were in office. The bill was written by dems, presented by dems, and signed into law by a dem.

Need...
  • #14
  • Oct 4, 2010 1:39pm Oct 4, 2010 1:39pm
Quoting Marv

That should be the real concern, not 50:1. Unless of course you're so rich (i.e. your capital is so big) that you are more than happy with 10-20% return per year.
10-20% return would be for those who knows how to trade. the rest will disappear....
The Market pays you to be disciplined
  • #15
  • Oct 4, 2010 1:44pm Oct 4, 2010 1:44pm
The same anti business crowd that set in motion the housing market crash & is now running the USA goverment are the very ones implementing these rules. Nothing new or surprising.

You get what you narrow mindedly elected. The Wall Street crowd backed Obama & his regime full bore & now they are in his sights & the regulators sights.

Yes, just maybe (?) a Republican lead congress will reverse all of this non sense, but I would never really count on it happening until its done.

Who is running the country of Japan? Some of the same like minded people that are running the U.S. Their view is they know whats best for the people (Liberalism). Wake Up People.
___________________________
  • #16
  • Oct 4, 2010 1:50pm Oct 4, 2010 1:50pm
While 100:1 has been the average leverage on FX (and some other products)for many years now, it is nonetheless insanely high.

I trade on 20:1 and have no problem to reduce it to 10:1 if necessary. If especially newer traders would follow that and tailor their position size accordingly, I believe the account blow-out statistics would show a much longer survival rate.

regards
daytrading
Enter Signature
  • #17
  • Edited 4:14pm Oct 4, 2010 3:27pm | Edited 4:14pm
You are correct that cutting leverage is not good thing. But Japan was first to cut leverage so you may want to look at the dates of your link and correct the title of this thread. The USA govt. is very unwise to follow the Japan's financial system in anything. They have had a broken economy for decades and now we are following them?!?!? That's insane or just incredibly stupid!

And for all those saying they don't use higher leverage simply can't use higher leverage because they aren't good enough from what I've gathered these past few weeks. They have their buying power cut by half and think it's good thing. I proposed on another thread that I will give all of them $50 for every $100 they give me yet none of them will step up to do it, lol.

But I have no problem with people choosing to use lower leverage, I do respect the idea of them having a choice to use whatever leverage they see fit to their trading. They obviously don't. What I have a problem with is them willingly standing in front of train that will eventually run them over too. Another poster ironically named "Dopey" posted a profound quote that sums their sad situation up perfectly:


First they came for the Socialists, and I did not speak out --
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out --
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out --
Because I was not a Jew.

Then they came for me -- and there was no one left to speak for me.


by
Martin Niemöller: "First they came for the Socialists..."
  • #18
  • Oct 4, 2010 3:54pm Oct 4, 2010 3:54pm
Quoting Jhig
Its like this ...

The world is blaming the worlds financial crisis on Speculators. US and Japan is the beginning. When other countries see how 'successful' lower leverage works for the countries interest, we'll see many other countries jump board. I suspect, 2011 will be very interesting for European traders.
I'm seeing a lot of articles lately about how bad and overreactionary the market is. Too many players. Should only be set by central bankers and cronies. Check todays Sarkozy/China talk. See what happened to daytrading in the 90's till 2002.

Quoting wm-eu
I think that a leverage of 50:1 is high enough - for blowing up your acc or also for doubling it
I'm glad you are an authority now. Thank you for thinking that instead of blowing 500 dollars with 100:1, now everyone is going to blow $1000 to achieve the exact same ratio and results. Why not just mandate the size of a pip being smaller? Maybe require a very expensive permit to be allowed an account?
Considering how much I seem to get ripped off on a day to day basis on everything, what does how many lots I can get and how much these brokers are allowing me to play with factor into anything in the universe?
Is this the same 2500 page bill that says the gov't will now watch every financial transaction I make at the grocery store? Mandate racial quota's in banks?

I'm glad I'm seeing a few other people posting who gets it with regards to leverage and the folks who wrote this bill. In school, after they laugh about the surpreme court being packed for not supporting the presidents agenda in the 30's, like this is normal and understandable, they teach that the depression was due to leverage, seems like nothing more.
Look where this warpness is getting us.

*********
OH btw, I thought Japan lowered it recently. I remember an article that I think was last year or early this year, "year of the regulator" or something similiar. It was talking about all the new rules in Forex going around the world. Japan, the US Israel, somewhere else.
Better make your pips now so you can make up when they drop it.
  • #19
  • Oct 4, 2010 4:33pm Oct 4, 2010 4:33pm
Quoting wm-eu
I think that a leverage of 50:1 is high enough - for blowing up your acc or also for doubling it
It's amazing how many traders don't fully understand leverage. There's a huge difference between having a high leverage available and using it on a trade.

I have always traded with accounts of 200:1 - 500:1 available leverage but only use a small amount portion of that. The beauty is you can trade multiple strategies add additional trades or hedge trades and do scalping without fear of getting a margin call. With 50:1 leverage traders are severely limited, especially those with small accounts. Scalping becomes much more difficult since it requires high leverage/margin and usually has very tight stops (therefore not being so dangerous), but the government is taking away our flexibility. I will now either make much less monthly profit or will have to borrow lots of money to be able to comfortably trade at my current level. Talk about stupid! If I were to borrow all that money and for some reason (although I'm a conservative trader) to loose or margin the account - I would be in a huge world of hurt, whereas, with the current situation and 200:1 or higher leverage I would only lose the small amount of money in my account. As you can see, in many circumstances this will make trading much more dangerous for people as they will have a lot more money (possibly borrowed money) at risk.

But I guess this is the Governments way of pushing the small investor out of Forex. As for me, I will be fighting with my vote and never ever vote for a bloody democrat again.
  • #20
  • Oct 4, 2010 5:03pm Oct 4, 2010 5:03pm
Quoting Leche Mocha
You are correct that cutting leverage is not good thing....
A few aspects of your story I am wondering about.

Firstly, I think traders who can produce consistent returns on low leverage must be somewhat more skilful than the one's who can only do it due to high leverage. So your argument is rather weak.

Secondly, after 23 years in the business as a professional, I can tell you that its only the retailers who offer such high leverage. If you take a close look at what the majority of institutional futures brokers and banks offer, you will find that 50:1 is the exception. Most are at 25:1 and were never any higher.

The only reason 500:1 down to 200:1 exists is to get 'poorer' participants to part with their money - which was a game unaffordable to them 15 years ago. This is a mega business like Las Vegas....and everyone wants to play.

Last but not least, I would like to see 6 months of life statements from people claiming to scalp with tiny stops (10 pips or so) based on full utilization of such high leverage (100:1+). My experienced guess is that the results will be next to nothing.

Don't get me wrong, I really don't care whether the leverage will remain or not - but the amount of successful traders emerging is going to be unchanged and will not depend on high leverage.

regards
daytrading
Enter Signature
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