As the title states, i read somewhere that real ECN brokers can only allow up to 100:1 leverage and any broker offering more than 100:1 is a “bucket shop” Is there any truth to this?
Thanks
What country are you based in, I believe there are some variances
No, that is not correct. It depends on broker and country. You don’t have to use the higher leverage, but solid ECN brokers can offer you more than that.
I think if you need more than 20:1 leverage you need to rethink your plan
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I use a low-risk compounding strategy that utilizes 50:1, but I get your point.
I hear you bro. Nobody knows your strategy as well as you. 
Just to note IC Markets is true ECN. They offer 500:1 leverage. I have 100:1 applied to my account but use 20:1when trading.
just curious with this sentence, I also trade on ecn account with armada markets, smaller deposit at 1:500, but the larger one 1:200, this are applied upon my registration, and alos on my trade, did you able to changing levererage while trading ? as you you use 1:20 when trading, how can i implement this on mine.
thank;s.
I’m not the best at explaining things bro, but I’ll give it a go. If I get something wrong hopefully some-one will correct me. With my broker I can apply online and request a varity of leverage rates from 1:1 to 1:500. Takes about 24hr for them to process my application. How it works with others I don’t know. But what does it mean and how do we determine whats right for us? I’ll try my best to answer that.
Leverage is seen as a double edge sword, used right it can accelerate growth, used wrong and yipity yipity that’s all folks. So, in my opinion, leverage is the fulcrum point between risk and return that balances a traders plan.The first step is knowing how your money management works unleverage. We’ll use mine because it’s simple but you should be able to apply it to yours. Also I’ll round values just for simplicity.
My base MM plan is one trade, once a day, every day. 10 pip SL and TP. 7 point comm on each trade. I win 3/5 trades each week netting 6.5 pips. A $10 000 account un-leverage allows me to trade 0.1 of a lot so equating to a net profit of $6.50 or 0.065% a week. That’s a massive $330 or 3.3% a year. My bank pays more than that. So not worth it. Answer leverage. So we’ll apply what is probably the accepted max industry recommends of 1:5. Now I can place a trade of 0.5 of a lot so increasing my net profit to $32 a week, $1761 or 17.6% a year. If I had $500000 this would provide a very modest income but again a good fund manager should be able to return 20% so why would one bother. Lets ramp it up to 1:20 leverage. With the equivalent of $200 000 behind me I can now trade 2 lots netting $130 a week, $9000 or 90% a year. Now we’re in the ball park. Just for the exercise at 1:100 leverage this system theoretical could turn $10 000 into $233 000 in a years time. Isn’t maths grand.
But this accelerated earning potential leverage provides comes at a price. And that’s accelerated loss. Now you need to think worse case example. In this case we loose all trades for 4 weeks in a row. 20 trades in total. And start the process all over again. Starting with our un-levered account each loss represent 10.7 pips so at 0.1 lots that’s`$10.70 or 0.11% each trade. Over 20 trades that amounts to a draw down of $218 or 2.2%. Very very manageable. At 1:5 we’ll loose $54 a trade, $1020 over 20 trades or a monthly draw down of 10.2%. Still manageable. Out at 1:20 our loss is now $216 a trade just over the standard 2% the industry loves to refer to. But it does equate to $3539 or 35% draw down. We’re still in the game but that sort of draw down hurts. Finally out of interest lets apply 1:100 leverage. Now I’m looking at a massive 90% draw down. That will kill any system. Here’s a fact but. Regardless of what leverage was applied. It would take exactly 21 straight wins to recover from this extreme case scenario. That means it would take 21 weeks to recover from this draw down if I was able to increase my strike rate to 4 wins from 5 trades.
So there’s our two sides we have to balance, return vs risk. The leverage we choose to apply will represent that fulcrum point where the two side balance according to your needs.
So the reality of it all is even though I can harness the the power of leverage my risk appetite dictates that I’m only prepared to take 2% each trade. I only need 1:20 leverage to achieve this. But I also have a very modest account and so am trying to work it hard to grow. And that will take years. A larger account you would be far more protective off and reduce your exposure thus also the need for extra leverage. So its hopefully clear to see why I have formed the opinion that if you need any more than 1:20 leverage then you need to rethink your plan. Just because you got it doesn’t mean you have to use it.
Reading back that seems as clear as mud but I hope it helps a bit. All the best bro
Bob
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Outstanding!
it’s something new for me, a leverage switching trader. will ask them the detail see if I able to do the same with my armada account. honestly this why I keep wandering around with online forum, there’s also still a good trader who willing to spare his time to post and share their valuable experience. I always got a new knowledge, a new edge, a better view. this management are real deal and nicely plan. while others keep smirking with money management, while in fact what they do is just a simple account management calculation (related to lot size), but your explanation clearly shown a total money management! investment management, and even better, leverage related risk management.
indeed, when talking with the pro, the most discuss thing are the worst case come at first, the DrawDown! I fully aware, and avoid any DD above 20-30%. most noobs just forget a 50% account loss means we already broke, they didn’t realize it required 100% profit to get back balance into initial deposit. while I learn this simple fact hard way.
“if you need any more than 1:20 leverage then you need to rethink your plan” you have to patent this quote, I assume i’m getting nearly implement those line, use lower leverage as the account bigger, and aim lower target profit, while put the risk at low as possible (10% -15%).
thank’s for the stunning explanation. will back report to you once I finally made same level traders as you achieve.
watch me grow, bro.
“O”
ECN Brokers can offer higher leverage that 1:100, however most of their LPs or Prime Brokers offer much lower leverage for them even 1:33, this is why Brokers which cover all their exposition with LPs and PB need to maintain lower leverage for their customers. If they offered 1:500 leverage they would have to maintaing 10 times bigger deposit with their LPs than their clients do. Of course brokers’ orders are netting on LP side which lowers the margin requirements however still broker can offer 2,3 times higher leverage on maximum than he gets from his LP or PB.
The basic answer is that most LP providers offer the broker 100 to 1, some even max out at 50 to 1.
however that doesnt mean that any 100 to 1 or 50 to 1 broker is ECN.
Other things to look for to make sure your avoiding a bucketshop,
deposit bonuses… ( this is a huge red flag)
an ECN business module cant sustain giving away even 20% bonuses, let alone 100 or more like some of these “ECN” brokers claim.
I agree that bonuses can’t be offered by true ECN brokers.
I heard true ecn can`t offer micro lot.
Is this true?
IC markets is true ecn?
Did you watch their PDS?
this their from their PDS.
“Trading with IC Markets carries an unavoidable risk of actual conflicts of interests because IC Markets is acting as principal in its CFD and Forex Transactions with you and IC Markets sets the price of the CFDs and Forex Contracts. Also because it may be transacting with other persons, at different prices or rates, or IC Markets will be trading with market participants.
The policy used by IC Markets is that as principal it issues the CFD and Forex Contracts to you based on the price it gives you, not by acting as broker to you. IC Markets obtains its price by dealing with its own Hedge Counterparty.
I don`t believe AUS and NZ brokers.
FYI,
ASIC and NZ regulation are just joke.
Hi,
true ecn broker can offer 0.01 micro lot?
I heard true ecn broker can offer minimum 0.1lot.
Since we’re quoting bro, best you do it in context
Typically there are two types of CFD models the Direct Market Access Model and the Market Maker model.The Direct Market Access model results in a corresponding trade in the Underlying Exchange for the instrument over which the CFD is based. On the other hand the Market Maker model uses the price of the Underlying Instrument on the relevant exchange to determine the price of the CFD however a trade may not necessarily be executed in the Underlying Exchange.
****** offers its CFDs based on a modified Direct Market Access pricing model. ****** makes hedge contracts at around the same time as it issues the CFD to you by making a corresponding hedge contract with its Hedge Counter party (not by placing orders directly into the market). ****** does not itself seek to make a market or speculate. ******s’ Hedge Counter party may in turn choose to hedge directly into the market or it may make a market in its pricing to ******, depending on the market for the underlying investment and the exchange hours.******s’ bid and offer prices to you are based on the corresponding prices offered by the Hedge Counter party to ******.
Generally the prices of ******s’ CFDs are set on the trading platform to give competitive pricing but you should be aware that ****** is responsible for setting the prices of opening and closing CFDs. ****** does not act as your agent to find you the best prices.
Just sub in IC Markets.
So if you spent a bit more time here you’d know I read a lot of different brokers PDS and think I have a good understanding what is is they offer. I suggest you take your fish pole and can of worms elsewhere.
To us monopoly money traders, we’ll never have access to DMM. We simply don’t have accounts large enough. But we persevere not thanks to the likes of yourself.