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ESMA and its implication

emotionaltrader
Aug 10 2018 at 09:36
posts 100
Strange how this decision by ESMA has coincided with Brexit and all the political and economic turmoil that could follow as a result.
Sterling below parity - 0.89

NZDUSD 0.62167/0.55 EURUSD Parity/ 0.89


Massive sell off going on over next few months. Possibility of Hard Brexit causing turmoil in financial markets. US to follow as Sterling, Euro, NZD, AUD recover if they recover!!!


Not looking good from my point of view!!!
emotionaltrader
Aug 10 2018 at 09:36
posts 100
Any Brits planning holidays abroad forget it... unless your rich!!!
emotionaltrader
Aug 10 2018 at 09:37
posts 100
I can see Euro/Sterling being revalued. With Euro being the stronger currency following Brexit.
emotionaltrader
Aug 10 2018 at 09:37
posts 100
Why are interest rates going up? Is it inflationary pressure or is it to save their currencies!!! My personal opinion for BOE increasing Interest Rate is not due to inflationary pressures but to save the currency, to stop it from collapsing!!! THIS IS MY OPINION!!!
emotionaltrader
Aug 10 2018 at 09:37
posts 100
Nobody more than me would like to be proved wrong regarding my currency predictions!!! Let's hope I'm wrong!!!
Tiffany (TiffanyK)
Aug 10 2018 at 10:27
posts 427
Novar posted:
Every day world is loosing more and more liberty !!!

We enter in the world dicture !!!
That's too dramatic, just cope with the change , you have choices, you can choose ASIC regulated broker for instance :)
Accept the loss as experience
NotyaBusiness
Aug 12 2018 at 05:29
posts 19
@emotionaltrader I understand why you are upset but ESMA protects the majority of people that which we must accept. Forcing brokers to make it clear and visible how many of their clients lose money is already a big help and the leverage limitation is a great protection as well because all those 'losers' may still lose money but lose much less.

Just work with it the best you can. This ESMA regulation is a market changer, you are a trader you are used to market change so deal with it and just do your best.

That's my opinion.
The man who wants nothing is invincible.
snoopy (Novar)
Aug 12 2018 at 05:30
posts 63
TiffanyK posted:
Novar posted:
Every day world is loosing more and more liberty !!!

We enter in the world dicture !!!
That's too dramatic, just cope with the change , you have choices, you can choose ASIC regulated broker for instance :)


They do not accept EU clients or they propose same leverage of ESMA now for EU residents !!
ovisun
Aug 12 2018 at 06:33
posts 439
@NotyaBusiness

If you are so much defending these new ESMA restrictions, please share with us one of your accounts where you successfully trade with the leverage of 1:30 ???
Matt (BluePanther)
Aug 12 2018 at 09:52
posts 1357
NotyaBusiness posted:
...the leverage limitation is a great protection as well because all those 'losers' may still lose money but lose much less.

The leverage limitation means more margin is required to hold positions, therefore more money will be lost as traders will require more margin (more deposit, greater balance, etc)

ESMA has this all wrong. Look at Japan: when cryptocurrency appeared many market participants jumped to crypto. ESMA's regulations will only push traders to look elsewhere, at unregulated and riskier markets.
niceGLer
Aug 12 2018 at 12:25
posts 169
Let's assume ESMA's intentions are fair, and to protect retail traders. According to that assumption the real goal was to implement the negative balance protection. I assume that because of this leverage had to be restricted to 1:30 for major currency pairs. I hypothesize that this leverage restriction was implemented for preventing the retail traders taking advantage of negative balance protection as speculated in the link I posted before. In such a case retail investor preceding an important news event would go short in one broker, and long in another. If a major move happens the negative balance protection and the 50% close out rule would act as a stop loss.
However, I'm not good enough in math in order to prove or evaluate such a situation.

Otherwise, the maximum leverage of 30 should be enough, although it requires more money to deposit. Nevertheless, I don't like it either.
NotyaBusiness
Aug 13 2018 at 06:24
posts 19
Okay guys, let me try to explain and no I am not trying to convince you or win any argument here I am just stating that I see the positive side of the new regulations.

You will never see ESMA's good side as a seasoned trader. You have to think with a newbie's head. ESAM isn't protecting the seasoned traders, protecting the newly lured in naive clients that don't know much about trading yet but feeding the brokers with their little money.

ESMA is addressing the psychology aspect of it all. Here is how I see it:

Before ESMA a lot of newbies were lured in with their tiny savings and thought that little money is enough to double it in a short time. Deposit $100 and buy 15 oz (1:200) or more Gold easy. But it was like trying to driving an F1 car with a brand new driver license.

ESMA put a balance on that. The number of traders that have been making money with Forex but won't qualify as a Professional Trader is insignificant compared to the naive and knowledge-less people that have been losing their precious savings because they were made to believe that trading is like snapping a finger and you get to double your little money. So yes there are traders that negatively affected by the new regulation but many times more people are strongly protected now.

Anyway as I stated above I am not gonna keep arguing this subject. I shared my opinion and that's all that is. Take it or leave it.

Cheers!
The man who wants nothing is invincible.
Pipperidge
Aug 13 2018 at 08:21
posts 13
@NotyaBusiness
The way I see it - the ESMA regulation is made to only help the brokers.
1. More equity required to open a live trading account = fewer newbies.
2. Fewer newbie traders = less customer support needed = less money paid for salaries.
3. Making other traders register as professional trades is good for the brokers because:
 - They (the brokers) are no longer obligated to provide negative balance protection.
 - The investor compensation funds do not apply for professional traders.
 - The broker is no longer obligated to provide best order execution conditions = more slippage.
4. Lowering the margin has nothing to do with protecting the little trader. It's a way to drive them away from trading (with a regulated broker).
5. It will make small traders to go overseas OR register with unregulated brokers which is an opportunity for them to get scammed by bucket shops.
That is why the big brokers are not making a fuss. The new regulation is made for them. Not to protect the traders.
Lowering the leverage has nothing to do with the risk a trader is taking.
If ESMA really wants to protect the traders - make them learn risk management.
Risk management =/= lower leverage.
That's just my opinion and nobody is obligated to agree.
Carlos (CarlosMZ)
Aug 14 2018 at 10:22
posts 55
I have to agree with Pipperidge on this one.
The leverage cap does not mean you will lose less - it means that you have to deposit more to trade the same amounts which results in the same losses, only faster because you can't keep your margin high enough and will get closed out faster.
This may not affect all traders the same, because the ones that used to trade ~50:1 leverage will have a bit of an improvement actually, but only for major pairs where the leverage is 30:1 because the margin levels have been dropped as well from 100% to 50%.
50:1 -> 30:1 and combined with 100% -> 50% this is a slight improvement. Granted, you will have to add some funds to your account in order to trader the same volumes but the ones that used to trader >60:1 are screwed by the new ESMA cap.
vontogr (togr)
Aug 14 2018 at 10:38
posts 4862
Pipperidge posted:
@NotyaBusiness
The way I see it - the ESMA regulation is made to only help the brokers.
1. More equity required to open a live trading account = fewer newbies.
2. Fewer newbie traders = less customer support needed = less money paid for salaries.
3. Making other traders register as professional trades is good for the brokers because:
 - They (the brokers) are no longer obligated to provide negative balance protection.
 - The investor compensation funds do not apply for professional traders.
 - The broker is no longer obligated to provide best order execution conditions = more slippage.
4. Lowering the margin has nothing to do with protecting the little trader. It's a way to drive them away from trading (with a regulated broker).
5. It will make small traders to go overseas OR register with unregulated brokers which is an opportunity for them to get scammed by bucket shops.
That is why the big brokers are not making a fuss. The new regulation is made for them. Not to protect the traders.
Lowering the leverage has nothing to do with the risk a trader is taking.
If ESMA really wants to protect the traders - make them learn risk management.
Risk management =/= lower leverage.
That's just my opinion and nobody is obligated to agree.

Nope. ESMA is disaster for brokers.
I have a system that trades a lot with 4k deposit. So broker made like $300 just on spreads from trading. Now I have to either decrease my trading activity 20x times or leave the broker.
LeadPellet
Aug 14 2018 at 10:40
posts 11
The way I see it, lowering the leverage will just mean that beginners will just deposit more in to their account (which they will then lose). So this is indeed better for the broker.
vontogr (togr)
Aug 14 2018 at 10:46
posts 4862
CarlosMZ posted:
I have to agree with Pipperidge on this one.
The leverage cap does not mean you will lose less - it means that you have to deposit more to trade the same amounts which results in the same losses, only faster because you can't keep your margin high enough and will get closed out faster.
This may not affect all traders the same, because the ones that used to trade ~50:1 leverage will have a bit of an improvement actually, but only for major pairs where the leverage is 30:1 because the margin levels have been dropped as well from 100% to 50%.
50:1 -> 30:1 and combined with 100% -> 50% this is a slight improvement. Granted, you will have to add some funds to your account in order to trader the same volumes but the ones that used to trader >60:1 are screwed by the new ESMA cap.

Do you realize that ....add some funds to your account in order to trader the same volumes....
Does mean you will make a lot lower profit.
Like if I made $400 profit on $4000 it was 10% a month.
If I made $400 profit on 40,000 it is 1 percent a month.
Tiffany (TiffanyK)
Aug 14 2018 at 14:54
posts 427
I think it will affect the brokers negatively as well, as Pipperidge says, 'Lowering the margin has nothing to do with protecting the little trader. It's a way to drive them away from trading (with a regulated broker).'
Regulated brokers will lose their retail clients.
Accept the loss as experience
TeoJonas
Aug 16 2018 at 08:18
posts 6

Nope. ESMA is disaster for brokers.
I have a system that trades a lot with 4k deposit. So broker made like $300 just on spreads from trading. Now I have to either decrease my trading activity 20x times or leave the broker.Agree with and i can understand it but I don't understand why ESMA is choking traders.
Pipperidge
Aug 16 2018 at 09:49
posts 13
togr posted:
Do you realize that ....add some funds to your account in order to trader the same volumes....
Does mean you will make a lot lower profit.
Like if I made $400 profit on $4000 it was 10% a month.
If I made $400 profit on 40,000 it is 1 percent a month.

But the broker makes the same amount of commissions! If not more, even.

TeoJonas posted:

Nope. ESMA is disaster for brokers.
I have a system that trades a lot with 4k deposit. So broker made like $300 just on spreads from trading. Now I have to either decrease my trading activity 20x times or leave the broker.Agree with and i can understand it but I don't understand why ESMA is choking traders.
The answer is in your own post! - 'Now I have to either decrease my trading activity 20x times or leave the broker.'

ESMA is bad for small brokers and DMA/STP brokers. The Market Marker brokers are only going to benefit from the new rules.

Let me try to explain why - with a lower leverage to trade the same volumes you must deposit more of your own cash. Then when you lose - the market maker makes more profits.
With DMA/STP brokers - they make money only from the number of orders open an closed (i.e - commissions). Which when the small traders leave = less profit for the broker.

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