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10 to 1 leverage suggestion by the CFTC - a death to the US forex market?

James_Bond
Feb 01 2010 at 09:45
556 příspěvků
5abi posted:
    this whole debate is kinda pointless. leverage is not crucial to success. if you cannot make money on 1:1, then you wont on 1:10 or 1:100.

Also it is proven statistically, that lower the leverage, higher your chance of surviving and flourishing in the long run.

Although you are right it is not crucial for success, however it may be a catalyst for success (failure also of course). I think leverage is a very important factor of fx trading and if you know how to use it right, it can be a very powerful tool.

Limiting the leverage will make fx trading less attractive, as it has always been known for the potential of unlimited returns in a very short period of time.
bizWiz
Feb 01 2010 at 15:55
397 příspěvků
so when will the cftc give their final decision? anyone knows? and once they do decide to limit the leverage, will the change be immediate in an account with a us broker?
WOOOOOBIE (klaatu)
Feb 08 2010 at 21:32
26 příspěvků
I've used 10:1 leverage for years and haven't had a problem.
Elkart
Elkart
Feb 09 2010 at 01:01
941 příspěvků
Not having a problem is hardly the issue.

Over and above that's the choice is being made for me, one I don't want to be made for me, it increases the risk to my portfolio by a factor of 10 and reduces my performance by a factor of 10. Not everyone uses the extra margin to do the biggest trade possible.

Added to that, the rules are constantly changing. Any business needs stability. The US retail forex industry has become a very unstable environment.

Lastly, it only affects the smaller traders. In effect the rich taking care of themselves again. The banks aren't going to be bothered by this. Nor are the big players. All this is doing is closing the door for the little guys. Barrier to entry.
Elkart
Elkart
Feb 09 2010 at 01:51
941 příspěvků
W,

Nother thing. I have an EA here that did 65% on Thursday, with that big dollar move. It's probably going to do 500% to 1000% this month if it doesn't wipe out.

So talking to a buddy yesterday he says, well do you think it'll make the month? And I actually think it will, because the markets are volatile enough. So he says, why don't we throw $500 at it and see. If we do make the month we can take the $2 500, go buy beer with it and just let the rest run. I've spent more than that on a dinner. It's not much of a gamble.

I'm a bit skeptical, it's a 50/50 thing we make it or not, but he wants to take a chance, I mean why not?

And 10:1 would be why not. Now I need $5000 for the same experiment. And that's a bit much for a gamble like this. So this takes the ability to do stuff like that away from the average US trader. While the rest of the world can carry on doing experimentation like that.

If you read Nicholas Taleb's The Black Swan, one of the reason for Amarica's success has been their ability to experiment and innovate. And this is being removed from the retail forex industry.

I can almost guarantee you within th next decade some of the richest people in the world will emerge from this arena, and it's not going to be Americans. It's going to be the guy sitting in Asia that could take the $500 gamble and go sell the results to the masses.....

I'm sitting here taking $500 potshots at the market while the average yank is struggling to find a broker that will take him. If even one of my potshot works out I'll have more money than Bill Gates in 5 years. US traders will in in effect be excluded from that.

There much more to this than a simple 'it never bothered me....'
bizWiz
Feb 09 2010 at 10:05
397 příspěvků
exceptionally well written elkart!

you should send your two last posts as it is to the cftc 😄
WOOOOOBIE (klaatu)
Feb 09 2010 at 10:25
26 příspěvků
Elkart posted:
Nother thing. I have an EA here that did 65% on Thursday, with that big dollar move. It's probably going to do 500% to 1000% this month if it doesn't wipe out.


Really? post a record and I'll believe it.

You have a system so why not test it and prove it over time? So much of the bucket shop forex market is full of overnight get rich quick people. My point was that many here seem to think it will kill the retail forex market all together. I don't think it will. People will still be able to use demo accounts and trial EAs and if they are keen enough should be able to take it seriously and replicate a real account. The changes (if any) might do away with a few gamblers but they are hardly going to kill it for everyone. Oh no, I actually need 3k rather than 200 to open account. Perhaps it will make people think twice before essentially gamble on heads or tails.

Can I suggest you just skip the EA step and flip a coin, 100 pip stop and target?
Elkart
Elkart
Feb 09 2010 at 10:45
941 příspěvků
<a href='' target='_blank'><img src=''/></a>

I have several systems and they all work. This one is just a faster version of my other stuff. I'll give it go. No need to wait. Heck I start with a $100. You can sit there and be careful till you ready to commit to $3000, me I'm off like a shot.

It won't kill retail forex. We'll all just bugger off to europe or the east. Us citizens however is coming into this race with lead boots now.

They are going to get left behind. That is if they can afford the starting line.

If I put in $100 tomorrow and this thing goes. Three months from now I'll have $50k - $100k, at the risk of $100. How much will your $3000 be worth? At worst, I'll be $100 of worse than you, but then of course you could also lose on the $3k.

I like my odds. I'll take the shot. And I feel sorry for the Americans who can't take the shot.

PipCollector
Feb 09 2010 at 11:14
92 příspěvků
klaatu posted:
..The changes (if any) might do away with a few gamblers but they are hardly going to kill it for everyone. Oh no, I actually need 3k rather than 200 to open account. Perhaps it will make people think twice before essentially gamble on heads or tails...

The effect might be bigger than you think. You don't know the distribution of the small sized accounts vs the larger ones (nor do I) but if for example 90% of retail accounts are less than $2k, then you can be sure it will affect those traders and the entire industry.

On the other hand, the effect might be even noticeable so it's really hard to tell.

Bottom line is they'll be forcing clients without the client having the possibility to decline, so it obviously can't be good for business (of any kind).
WOOOOOBIE (klaatu)
Feb 09 2010 at 11:20
26 příspěvků
Congrats, you nearly doubled your money in what, two days? I've seen people do that at the casino. Thing is they get lucky once or twice and they keep going back. Sure enough 95% give the money back. That said though I look forward to seeing you turn 10k in 100k... hell at that rate of return we could expect to see you with a million by Easter yeah?

Thing is with or without leverage people can make money on FX if they are good. I just think the table bashing that is going on here needed some balance so that's why I said what I did. ie. The sky is not falling.
Elkart
Elkart
Feb 09 2010 at 11:38
941 příspěvků
W,

Ya. This would be gambling with style. However, most of my accounts are well into double figure growth per month. And I wasn't aiming for this. I was quite shocked when I saw it. It's less of a gamble than it looks. Got some serious MM stuff running on it. If it gets out of hand it will get slapped back into something sane. That rise there happened so fast that the MM didn't even activate. My orders got hit. They got protected and they TP'd. Money in bank.

It was chugging along nicely before that event and is still chugging along nicely as you can see.

But I think US brokers will disagree with you. For them the sky is falling. They banded together and they're taking legal action. For them it's game over.
Elkart
Elkart
Feb 09 2010 at 11:43
941 příspěvků
I mean after this, what will the CFTC do next? No one is going to stick around to find out. It's a cluster fuck. I don't want to deal with US brokers anymore. No one does. They're unstable. IBFX can send me a mail in 5 minutes telling me the CFTC has decided we can only short the dollar on Wednesday. Why would I or anyone want to operate in that environment?
Elkart
Elkart
Feb 09 2010 at 11:48
941 příspěvků
And people argue with me on this. But I am sure there are plans to move dollar trading away from the banks to the CME. And I think all of this is part of that.
WOOOOOBIE (klaatu)
Feb 09 2010 at 12:02
26 příspěvků
If your systems are so good how come they are private?

My knowledge on this subject is next to zero but the likely hood of them shutting down what is probably a billion dollar industry seems very unlikely to me. I think the US regulators have bigger fish to fry, so to speak.

Also I have a thinkorswim account with access to FX futures. So I guess this means I'm doubly-not-worried. Perspective.
Elkart
Elkart
Feb 09 2010 at 12:15
941 příspěvků
I prefer it that way. Not looking for business. The people that need links have them.

You're missing the point completely. Whatever the Us regulators aim is, they're harming US industry, US reputation and their are causing harm to individuals.

You might not be worried. But a lot of other people are. My one Washington based buddy is livid. He has to go spend a few thousand dollars now to get his accounts in offshore companies, cause he can't get new accounts. And he won't accept the new terms. He doesn't have a small account. Few hundred thousand. Many, many traders feel that way...

We tried to take a big client to a European bank last year. They wouldn't touch him. They're not interested. If that doesn't ring alarm bells for you nothing will.
Elkart
Elkart
Feb 09 2010 at 12:55
941 příspěvků
Can anyone guarantee me IBFX is going to be ok? Just safer to move my money. US retail forex is in deep shit mate...
Elkart
Elkart
Feb 17 2010 at 11:36
941 příspěvků
Errrrrr.....

Was speaking to someone way clever than me and much deeper into this than I am. If the CFTC ruling goes through, it will apply to liquidity providers, of which a significant part is US, even for European brokers.

So if it goes, it's going through to everywhere. And it will go through. Maybe not at 10:1, but either way we're all in for major adjustments.

Might just as well start trading options on fx. It's a cock up of note.

James_Bond
Feb 17 2010 at 11:55
556 příspěvků
Elkart posted:
    Errrrrr.....

Was speaking to someone way clever than me and much deeper into this than I am. If the CFTC ruling goes through, it will apply to liquidity providers, of which a significant part is US, even for European brokers.

So if it goes, it's going through to everywhere. And it will go through. Maybe not at 10:1, but either way we're all in for major adjustments.

Might just as well start trading options on fx. It's a cock up of note.


Interesting of you to say that, as I've been wondering about it recently.

But let's say it does affect the US liquidity providers - even if a Eurpoean broker works with them, can't they just keep the leverage 'in-house'? I mean how can a liquidty provider know if the trade was taken with leverage or not?
Elkart
Elkart
Feb 17 2010 at 12:13
941 příspěvků
ECN broker or not, that is the question.

In house the broker can do what he wants to, gets one successful trader client that brings him 100's of clients and he'll get traded into the ground.

The ECN guy has to give it through to the market.

Buggered either way.
James_Bond
Feb 17 2010 at 12:23
556 příspěvků
Ok, so it's actually a major issue 🙃

I guess us little guys have no other option but wait for the verdict..
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