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Avoiding negative balance? Slippage? How do you do it?

  • #21
  • Jun 22, 2015 1:07am Jun 22, 2015 1:07am
Are you kidding me? You avoid negative balances by not being highly leveraged! That's the answer to your question. Anything more than 2x leverage in the currency market is asking for trouble.
  • #22
  • Jun 22, 2015 1:31am Jun 22, 2015 1:31am
Quoting replaced
Are you kidding me? You avoid negative balances by not being highly leveraged! That's the answer to your question. Anything more than 2x leverage in the currency market is asking for trouble.
How much money can you earn by not using anything more then 2x leverage? #YouWouldBeWastingYourTime
Men lie, women lie, the numbers don't.
  • #23
  • Jun 22, 2015 1:32am Jun 22, 2015 1:32am
Quoting autobob
I started using a Spread Betting account about six months ago as another way of trading currencies. Events like the SNB move a while back has made me ultra weary. The Spread Betting account I use allows Guaranteed Stops on all my trades. It does what it says on the tin - no matter what happens you can only lose the stop you originally set. It costs a coulpe of pips more on the spread for the privilege of setting a Guaranteed Stop but in these days of unpredictable volatility, it's worth it for piece of mind. I should point out that at times of expected...
That is another smart option. Yet, you have no Guarantee that the broker itself won't go burst.
Men lie, women lie, the numbers don't.
  • #24
  • Jun 22, 2015 1:39am Jun 22, 2015 1:39am
Quoting BeHonest
{quote} How much money can you earn by not using anything more then 2x leverage? #YouWouldBeWastingYourTime
You're asking the wrong question. You should be asking what would the theoretical ROI percentage wise would be. Certainly a lot higher than higher leveraged positions. All you're doing here is trying to justify a highly leveraged position. It's not justified. If you actually had a positive ROI and traded 2x leverage, then it would take a few years to become a millionaire instead of a few months.
  • #25
  • Jun 22, 2015 1:55am Jun 22, 2015 1:55am
Quoting honestknave
{quote} If this is of concern to you, consider seeking out a broker offering negative balance protection. This may introduce some issues of its own (broker model), but nevertheless it is an option. You may also want to examine which brokers forgave negative balances in the wake of CHF fiasco (although past practice doesn't guarantee the same in the future). As someone still waiting for a payout from Alpari's collapse, you could also add that to your list of worries even if you don't go into negative equity
This is the best solution.
The other only alternative solution is open a Limited company (SARL --GmbH -- AG ) in a third world country where it requires almost nothing to maintain it. Let it sleep, or inactive but registered.
Many countries requires less than only USD 1K. That is how many people protect their personal wealth in any business.
  • #26
  • Jun 22, 2015 3:08am Jun 22, 2015 3:08am
Quoting orabi
1-trade what you offer to lose and dont change your life style. 2-dont ever never take a loan to trade or sell an asset like a car or a house . 3-this market will make you rich by time only so dont put a range hoping to make millions act with it as a habit for more income. 4-use stop loss and dont over leverage i use 25 :1 as maximum . 5-watch for news time and get out in that time and enter after it . 6-enjoy trading as an art a hobby and a passion. this is my advice all have a nice day
THIS! Absolutely spot on, this post should be pinned! also i'd advise people dont do day trades, the money is in the long term, less is more in trading!
  • #27
  • Jun 22, 2015 5:25am Jun 22, 2015 5:25am
I think ultimately its just a case of doing what you can to avoid these kind of events. After the SNB I think its fair to say a lot avoid pegged currency now. As for the negative equity promises offered by many I am always wary that to a large extent the brokers in question must be acting as MM/ dealing desk execution to offer this kind of promise, (which there is nothing wrong with necessarily). Look at the brokers which came out after saying its not a problem and those who nearly or did go bust. There was also those that believed there to be negative equity promises on their accounts but were troubled by lots of small print. I think most were/are being honoured in the long run but not without a lot of heartache. The SNB caused such a large problem because it was so huge and fast there was no liquidity to trigger peoples stops as it went beyond most peoples orders etc. There were whispers of trouble though before hand. I think one broker lowered their leverage allowances some time before hand (dukascopy?) presumably because they were concerned. Large news events will really only cause wide spreads and slippage in your stops triggering, which if your being reasonable with leverage will only ever set you back a bit as liquidity shouldn't be to much of a problem. Weigh up the risk. your probably more likely to make a mistake trading worrying about it than it causing a problem.
  • #28
  • Jun 22, 2015 6:28am Jun 22, 2015 6:28am
Interesting thoughts everybody..

So far the best options I can really see are:

1) Trade with a company that offers Negative Balance Protection (Ideally ECN account - FxPro potentially)

2) Look into setting up and trading through a Limited Company (Anybody got any more details on this?)

3) Reduce leverage and consequently risk

Of course however, reducing leverage reduces returns but should reduce overall chance of getting into lots of trouble.

Any other thoughts would be helpful.. it appears it's not only me thinking this question!
  • #29
  • Jun 22, 2015 7:19am Jun 22, 2015 7:19am
Quoting flinx
Interesting thoughts everybody.. So far the best options I can really see are: 1) Trade with a company that offers Negative Balance Protection (Ideally ECN account - FxPro potentially) 2) Look into setting up and trading through a Limited Company (Anybody got any more details on this?) 3) Reduce leverage and consequently risk Of course however, reducing leverage reduces returns but should reduce overall chance of getting into lots of trouble. Any other thoughts would be helpful.. it appears it's not only me thinking this question!
Yes - one idea is to day-trade , and I mean DAY. Say 9 am to 4pm London time. 2pm to 9pm New York I think. That's when the liquidity is.
Every night, early morning, evening etc there is less market so bigger spikes ! some are fake , stop hunting etc. You can profit a bit but lose a lot. The CHF fiasco was an exception ( was it 9:20am ?) - these Swiss guys just decided - hey lets ruin the markets instead of morning tea.


Quoting Spoon138
There were whispers of trouble though before hand. I think one broker lowered their leverage allowances some time before hand (dukascopy?) presumably because they were concerned.
Yes - Alpari Dubai or Japan or somewhere issued news feed !! about 3 days beforehand . I think they even lowered the leverage. Alpari UK - who cares !
And I thought they talk to each other !!
Beware of robber banks (RB), bad advisors.
  • #30
  • Jun 22, 2015 8:29am Jun 22, 2015 8:29am
Quoting replaced
{quote} You're asking the wrong question. You should be asking what would the theoretical ROI percentage wise would be. Certainly a lot higher than higher leveraged positions. All you're doing here is trying to justify a highly leveraged position. It's not justified. If you actually had a positive ROI and traded 2x leverage, then it would take a few years to become a millionaire instead of a few months.

The use of high leverage or any leverage over 2x is what allows us to be able to wager in the market to begin with. A person who only has say 5k usd to trade with, won't be able to do so if he uses 2:1 leverage. Having the amount of funds required to open a position with 2:1 leverage would take you more pips then anyone could possibly earn to make profit worth speaking about.
Men lie, women lie, the numbers don't.
  • #31
  • Jun 22, 2015 10:03am Jun 22, 2015 10:03am
Quoting BeHonest
{quote} The use of high leverage or any leverage over 2x is what allows us to be able to wager in the market to begin with. A person who only has say 5k usd to trade with, won't be able to do so if he uses 2:1 leverage. Having the amount of funds required to open a position with 2:1 leverage would take you more pips then anyone could possibly earn to make profit worth speaking about.
That's not true. You can trade with just 5k in currency by using micro-lots. Most people are satisfied if they make 5%-10% return on their investments a year. So a $5,000 investment going to $5,100 after a year is great. It is better to make $100 after a year rather than lose $4,000 from gambling in Forex. Your ROI is NEGATIVE by going high leverage. It's been mathematically proven. You WILL lose all of your money eventually. The highest theoretical ROI should be with 1:1 leverage.
  • #32
  • Jun 23, 2015 4:07am Jun 23, 2015 4:07am
Quoting BeHonest
{quote} That is another smart option. Yet, you have no Guarantee that the broker itself won't go burst.
However, if they offer negative balance, they probably offer a trader ringfenced funds.

So basically if they were to go bust, then the Traders would be the first to get the money back, and not the administrators.

That is the first two things i look for - Neg balance guarantee and ringfenced traders funds.
  • #33
  • Jun 23, 2015 9:39am Jun 23, 2015 9:39am
Quoting replaced
{quote} That's not true. You can trade with just 5k in currency by using micro-lots. Most people are satisfied if they make 5%-10% return on their investments a year. So a $5,000 investment going to $5,100 after a year is great. It is better to make $100 after a year rather than lose $4,000 from gambling in Forex. Your ROI is NEGATIVE by going high leverage. It's been mathematically proven. You WILL lose all of your money eventually. The highest theoretical ROI should be with 1:1 leverage.
Your rate of return isn't in negative by simply using high leverage. Your rate of return also is determined on the system which you are using. The ability of leveraging alone does reck your account. A person could have 5,000 usd in an account, and only open orders of .01 lots thus making it harder for the account to be margin called compared to if the broker uses say 5.0 lots with the same leverage and same account size. Your claims are simply theoretical and almost never apply to a traders decision to buy or sell.
A person could very well deposit say 5000 usd with a 2:1 leverage account, and even if he or she was to use 100% equity, the amount of pips that one trade would take him to margin call would be IMPOSSIBLE for any given currency to move in order to margin call. especially EUR/USD. So imagine a trade using 1 -2% equity and not adding to his trades if he wins or losses. We have to be realistic here, and not pessimistic.
Men lie, women lie, the numbers don't.
  • #34
  • Last Post: Jun 23, 2015 11:00am Jun 23, 2015 11:00am
So to add an interest twist to this thread. Do you know how you could NEVER lose with a broker that offers negative balance protection?

1) You would need the broker to allow you to use extreme leverage ( 500:1 +)
2) You would need the broker to not widen the spread more then 10 pips prior to market close.
3) You would simply need two accounts.

Here is what you would have to do.

1) Deposit the same amount of funds in both accounts. Say 2000 usd in both accounts.
2) Prior to the market closing (just seconds before) You place a buy in one account for 100% equity, and a sell in the other account for 100% equity.
3) The market would simply have to gap in either direction more then 10 pips (assuming you are using 1000:1 or higher). That margin call one account, and cause the other account recover what was lost + 100% profit fore every 10 pips more which it gaps!

That isn't theory it is indeed FACT!
Men lie, women lie, the numbers don't.
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