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!
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!
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.
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.
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.
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 <[email protected]> that way your voice is heard. Include ‘Regulation of Retail Forex’ in the subject line of your message.
Good point.
Email Sent! Now everybody do the same.
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” - [I]unhuh[/I].
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 [I]acceptable percentage of their account[/I] (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.
[B][U]CFTC: Don’t get mad… take ACTION![/U][/B]
Emergency online town hall meeting [I]today[/I] at 14:00 GMT to plan organized resistance:
Francesc’s Weblog � Live Coverage: Open Discussion about the CFTC 10:1 Leverage Proposal
Information on how to submit your formal complaint to the CFTC:
CFTC Proposes 10:1 Leverage Cap on Retail FX
The full text of the CFTC proposal (much more in there than [I]just[/I] 10:1):
Public comments received so far:
</title> <script id=“ssInfo” type=“text/xml” warning=“DO NOT MODIFY!”> <ssinfo> <fragmentinstance id=“fragment1” fragmentid=“cftcHeader2” library=“server:CFTC000041”></fragmentinstance> <fragmentinstance id=“fragment2” fragmentid=“cftcCSS” library="s
On-going updates & discussionr:
Francesc’s Weblog � Andrei Pehar Considers Futures Brokers To Be Behind CFTC 10:1 Leverage Proposal
[B]Black Knight, [/B]
Thanks for the links.
Technically, you aren’t allowed to post links here, because your post-count is below 50. Therefore, the mods might edit your post, deleting your links.
In the event that your links are deleted, I will repeat them here:
[B]Black Knight’s links (from the previous post): [/B]
[ul]
[li]Francesc’s Weblog � Live Coverage: Open Discussion about the CFTC 10:1 Leverage Proposal
[/li]
[li]CFTC Proposes 10:1 Leverage Cap on Retail FX
[/li]
[li]http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2010-456a.pdf
[/li]
[li]Francesc’s Weblog � Andrei Pehar Considers Futures Brokers To Be Behind CFTC 10:1 Leverage Proposal
[/li][/ul]
There was a problem with your third link (the complete text of the CFTC Proposal), so I have replaced it with a link to the Proposal as printed in the Federal Register. I hope that this document is identical to the one you intended to link to.
Thanks again for this info.
Clint
Hi Clint… if the moderators here (and they are good people I used to work for them) care about the future of forex, then they will make an exception.
I am not promoting any product or service, simply asking people to write to their regulator to voice their opinion about the future of their industry.
I may have under 50 posts, I have contributed many articles to their blog.
Seems the CFTC doesn’t want anyone to see the full text of the proposal during the public comment period. It worked yesterday. No worries - I’ve made it available for download on my website:
http://fx-knight.com/smForum/index.php?topic=1027.msg5080#msg5080
The proposal in the Register is dated Jan. 20th (the original proposal was dated Jan. 7th). We are looking through to see what they changed.
There is going to be a debate about the CFTC proposal on FXstreet in 45 minutes.
Actually, the FIFO thing came first. That was last spring. The 100:1 cap only went into effect at the end of November.
As for your comments on FIFO, the bottom line is it doesn’t matter one iota. No matter which contract you close at what time, the P&L all works out the same.
Now, they want 10:1 leverage, “to protect the client” - [I]unhuh[/I].
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.
I hate to say it, but we’re already way outclassed. Regardless, the institutions don’t care about us at all. We don’t swim in the same ocean as they do.
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 [I]acceptable percentage of their account[/I] (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.
Agreed.
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.
Also agreed.
Here is the link, everyone:
This shouldn’t come as much of a surprise, unfortunately.
You can look at all the comments CFTC has gotten so far by going to their website. they are getting an earful. Contact <[email protected]> and make your feelings known!
The USA needs a revolution.
“How can a people who have struggled long years under oppression throw off their oppressors and establish a free society? The problems are immense, but their solution lies in the education and enlightenment of the people and the emergence of a spirit that will serve as a foundation for independence and self-government.”
Do you think they care what you and I say? We are mere pawns.
If we were to force them using weapons, we would be labeled terrorist.
They force us using weapons, and they are just doing their jobs.
Do you see the irony?
“He who controls the present, controls the past. He who controls the past, controls the future.” George Orwell.