CFTC Leverage change to 10:1 in the US??...What do you think?

[Pipcrawler]

Have you heard the big buzz in the forex industry lately about the CFTC imposing a 10:1 maximum leverage on retail forex ?

If not check out Forex Ninja's blog about it and let us know what you think here!

[akeakamai]

I'm happy that my trading methods would work just fine in 10:1 leverage but I must say it's starting to cramp my style. This means I'd have to leave more money with my broker, meaning slightly less return than my bank savings account gives.

I can see how this could save some noobie trader an account blowout, but it seems too close to the gov't saying retail traders just shouldn't trade anymore and shutdown the whole industry.

[Letseethepips]

I'm happy that my trading methods would work just fine in 10:1 leverage but I must say it's starting to cramp my style. This means I'd have to leave more money with my broker, meaning slightly less return than my bank savings account gives.

I can see how this could save some noobie trader an account blowout, but it seems too close to the gov't saying retail traders just shouldn't trade anymore and shutdown the whole industry.

Agree!There seems to be some type of agenda here.Ninja said the Secratary supposedly is doing this for the best interest of the retail trader and is that to wipe them of the map?It smells of a elitetist mentality this will basically raise the cover charge for only the suit and ties can get in!

[rhodytrader]

Personally, I don't see it happening. There will be way too much clamor from both brokers and traders against it. Retail forex trading in the US would take a real hit.

[BillyBobPipton]

Don't be so quick to make positive judgment on the CFTC or the US government for that matter. In the current economic landscape, the CFTC may rule in favor of the small, uneducated guy who blew his trading account in 10 minutes because he was trading at 100:1 leverage and didn't know what the H he was doing, and they just see it as "helping". Yea, right!

Leverage and risk are two different things. I'm crossing all my fingers and toes that the CFTC doesn't screw things up here.

[rhodytrader]

The fact that the NFA rule capping leverage at 100:1 just went into effect at the end of November leans strongly in favor of the CFTC not making things any more restrictive any time soon.

[Jason Rogers]

Don't be so quick to make positive judgment on the CFTC or the US government for that matter. In the current economic landscape, the CFTC may rule in favor of the small, uneducated guy who blew his trading account in 10 minutes because he was trading at 100:1 leverage and didn't know what the H he was doing, and they just see it as "helping". Yea, right!

Leverage and risk are two different things. I'm crossing all my fingers and toes that the CFTC doesn't screw things up here.

If there's no public response against the leverage reduction proposal, then the odds of this being passed are very high. If you would like to comment for or against, please send an email directly to the CFTC at secretary@cftc.gov that way your voice is heard. Include 'Regulation of Retail Forex' in the subject line of your message.

[BillyBobPipton]

The fact that the NFA rule capping leverage at 100:1 just went into effect at the end of November leans strongly in favor of the CFTC not making things any more restrictive any time soon.

Good point.

[BillyBobPipton]

If there's no public response against the leverage reduction proposal, then the odds of this being passed are very high. If you would like to comment for or against, please send an email directly to the CFTC at secretary@cftc.gov that way your voice is heard. Include 'Regulation of Retail Forex' in the subject line of your message.

Email Sent! Now everybody do the same.

[TopsandBottoms]

First it was down from 400:1 to 100:1 - fine, I rarely abuse my leverage or my account percentage per trade rule.

Then, they decided which contract I had to close first, if I have multiple contracts in one deal - this one was really obnoxious because it makes it hard to hold onto a trade throughout a trend, where the idea is to leave one contract at the very bottom, and let it ride, while using the others to chase price much more closely. This also makes adding to and subtracting from a position a hell of a lot less flexible. Still adjusting to this one, still not liking it one bit.

Now, they want 10:1 leverage, "to protect the client" - unhuh.

What this does is dramatically reduce the amount of wiggle room for any trade you have on the table, if you have a small account. This one is smells like it's tailor made for the big institutions that have the capital that we do not, which means they have more flexibility - this is a full contact sport and we will be dramatically outclassed, and much more vunerable.

The claim of protecting the small investor is dubious at best. An undisciplined and reckless trader will liquidate their account regardless of the margin they are allotted, 400:1, 100:1, 10:1, 5:1, 1:2, whatever; leaverage is irrelevant if someone is exposing more than an acceptable percentage of their account (*This would be a less terrible idea in fact - a regulation to limit the total stop loss setting on any particular trade as based on your account size, and it would actually protect a newer trader. However, I'm still opposed because I don't think the government should dictate what I do with my money or what you do with yours*). The only way to protect these people is to either tell them to learn the market, operate with discipline, limit their exposure until they learn, or tell them to invest elsewhere.

This also serves to limit the gains of small investors that have learned to use leverage carefully and only when everything lines up for an individual trade. Leverage is a means making the most of your careful study and management. This makes it much much harder to start small (like I did) and increase the size of your account to the point at which you can make real money. Don't be under the illusion that this will help small investors.

I'm trying to imagine what comes next if this one goes through, other than a massive sucking sound of cash leaving the States as all the small players yank their cash ~ my broker has a UK division, so no skin off my back I guess. Now, time to start planning the ultimate trade - I think I'll wait till GBP/USD hits below 1.60/58 before I move my cash, lol.