If we took action against this if passed, for example: Boston Tea Party, then they would care. If they don’t want to listen to us and stop us from making money, then we’ve got to put their nuts on a chopping block and show them who is boss. This is a democracy and it is our individual freedoms that make up the spirit of this country.
Others have said this and I highly agree: I find it highly ironic that people are fleeing to Great Britain to find relief from tyranny and oppression in the United States. Although not physically fleeing, the concept is the reverse of the 1776 American Revolution. Not to say that a war is brewing, but when people’s liberties are violated this is how a war can be started. If you get enough protests that are ignored and people are pushed into a corner, don’t be surprised if something goes down.
10:1 leverage harms people with small accounts who want to trade medium to long term strategies. You’d need a very big account if you wanted to have a 100-150 pip stop loss for a swing trade. People with little money will be encouraged to adopt shorter term strategies, which are more difficult by default.
The CTFC should focus on making brokerages more upfront in disclosing risk, i.e. risking X% of your account will result in Y% account depletion in just Z trades.
The CTFC should curb advertising that tries to make FX trading look easy. Failure statistics should be made clear, i.e. “Warning: it is estimated that 90% of all traders fail to be profitable”
The CTFC should spend more time investigating dealers who manipulate price feeds, and should even consider doing surprise inspections to see if such manipulation occured or not.
Traders with little money will be pushed toward dealing desk broker/dealers who have smaller lot sizes, which is not something suitable for all traders.
If you write, the CTFC should listen. I remember I wrote FINRA when they considered changing FX leverage to 1.6:1! Thank God they struck that one down.
Bottom line is, more FX regulation is always BAD. Regulation should focus on preventing brokers from being cheats, not preventing professional traders from making a living.
I have written numerous letters and made my calls and I will not stop. I want them to know me by my first name. My money/business will just go off shore if this rule happens and that does not help the US as a whole.
Remember to write and call again and again and again and to prompt your friends, etc. to do the same folks. Being angry and motivated now is nicem just don’t forget about it. Being angry and motivated and fighting this until it is dead and gone is BETTER!!! lol
There are two more points I forgot to mention in my letter, which maybe some of you might want to consider:
If leverage is lowered, it will be impossible to trade multiple positions.
Say for example you’re trading GBP USD, and NZD JPY at the same time. These are two different trades, they are not coupled together so the risk is diversified. With lower leverage forget it, you either trade one or the other, and that robs you of a profitable opportunity.
If the CTFC is SO WORRIED about leverage being THE source of evil, why don’t they create a standardized test that tests people’s basic money management skills, and then allow the people who pass the test to use 400:1 leverage if they wanted to?
All they have to do is create a test (which if done by committee, will take a year :D), and then get it listed with testing centers like Prometric. You want to use 500:1 leverage in your account? Fine, sign up at your local prometric, pay $50, take the test, then you can take a home equity loan and risk 40% of your account per trade
This might actually be a good last resort if the CTFC tries to stick with the 10:1 rule. It will cost them time and money to create the test, but it will definitely be worth it.
Personally, one regulatory idea I’m not against is making people get certified. I took the series 65 exam, for example, just to test my knowledge (although 50% of the test is the most boring legal mumbo jumbo). If trading is a true profession, they should make people aware of the risks and dangers, instead of letting some moron with a gambling addiction take cash out on their credit card and dig themselves deeper into debt.
I believe that this is to ensure that the newb trader doesnt lose all his dough… so they up the entrance requirement so that only serious players can play… inadvertently what then happens is you weed out the ‘little’ guy, so that is a win-win…
THIS idea sucks!!! Rage against the machine… Stick it to the man!
In relation to #1 -
Yes. As a beginner I NEEDED leverage and it made the impossible…possible. But I RESPECTED it and was very careful. Now, even with 10:1 leverage my account is large enough to trade multiple positions. Still, I weep for the beginner or little guy. IT IS NOT FAIR to rob them of leverage options.
As to #2 -
An honorable and creative idea but pointless and it just complicates things. Fees, tests and other hurdles just inflict “death by a thousand cuts” to the little guy trying to get started.
Also, look at the geniuses…the brilliant, seasoned experts every year that get fooled by someone like Madoff! The SEC…yes, the big guys…did not use their heads to catch him. Simply following the money and auditing his supposed trades would have shown clearly that he was a fraud. All that knowledge, experience and education at the SEC still did not stop him.
The point is…we are human and nothing will ever be 100% safe or effective.
When I signed up with my first broker 12 years ago, I had to sign and agree to the risks. Roughly it was about 5 signatures I think. Today, I have to read through 150 pages of notifications and liability releases, sign and initial 100 times, pledge my grandmother’s soul and my first born son and promise to scrub behind my ears! How much more of a ‘HEADS UP’ do you need? :eek:
Where were the consumer protections when all the crazy mortgages were being given out?
The CFTC is worried about some fool losing $300 to leverage because he did not take 5 minutes to read and understand it. Yet, people were signing agreements to repay a loan for 700K on a house worth 300K 2 years earlier and the only obstacle was finding a pen!!!
I am a licensed Realtor. I watched 3 things happen.
#1 - Mortgage companies lie and hustle clients and lie to them about their obligations or the consequences in 3-5 years.
#2 - The real estate industry basically stood by silently and did nothing to stop it. The sharks had a feeding frenzy.
#3 - No matter how hard I tried to recommend a client have an attorney look over their paper work, have another, more honest mortgage broker review the terms or just comparison shop for them and even warn them the house they liked was waaaaaaaaaaaaaaaaaaaaaaaay overpriced and would be a bad investment in the short term…MANY of them ignored me or got offended by me bursting their bubble.
So the blame gets shared by all. I was one of the honest agents trying to get people to calm down and reconsider. I saw all of this coming. I warned other agents in my office to stop spending and save every commission because the gravy train was going to end badly!
Now they are selling their cars (one single female agent had 4 cars!!! I actually held on to my pristine, reliable 4 cylinder 2002 Mitsubishi and I still have it), liquidating their investments and about 60% quit and got 9 to 5 jobs with guaranteed pay checks since the market collapsed.
The point here is that everyone did what they wanted regardless of education, legal precautions, ethics, advice, etc.
If anyone thinks rules, tests, legal release forms or 10:1 leverage is going to prevent loses…it will not. Greed is very powerful.
CFTC…ask yourselves one simple question - do you honestly think no one using 10:1 leverage has ever busted their account recklessly? Call me…I can tell you about a good friend of mine that blew away his 50k 10:1 Futures account.
Fools are fools and their money will soon part from them.
I agree with the fact that in the end, idiocy can take a hold of just about anyone. Terrance Watanabe built up a nine figure net worth through a business, then in one year blew it all away on a crazy gambling streak. The casinos are actually suing him because he still owes them 14.5 million in unpaid markers. You’d figure a guy that had what it takes to build a fortune like that would have the prudence to keep it all! Some of the biggest traders have done similar things.
The bottom line of all these long forms and red tape is that brokers want protection from lawsuits. Will it stop a self destructive person from ruining their account? Absolutely not. People just blindly go through the forms and believe fully at the moment that they will be oh so careful, or they simply smirk and say “typical disclaimer nonsense”.
A test is a bit more of a serious thing I think. It forces preparation. I think that if people understood different money management rules (i.e. optimal f, Kelly Criterion, fixed percent of account rule), and what the dangers are of overleveraging, i.e. martingale tactics, risk of ruin, they will at the very least be fully informed, and nobody can argue that they were misled. At that point they have what is known as “sophistication”.
Of course, licensed investment advisors, doctors, accountants, attorneys, plumbers, etc. screw up left and right. But the one thing that is bought up in court is “Don’t tell us you didn’t know - you had professional certification”.
If someone is to take trading as a business, certification should be viewed as something that will help you become a better trader by forcing you to prepare and learn something that is of benefit to your craft.
Even putting that aside, brokerages and the CTFC will feel much more off the hook if people couldn’t argue that their lack of sophistication caused big losses. It would simply make all the traders with sour grapes suck it up and realize that whether they’re starting a trading account or buying a franchise, or starting an ebay business, you have to have your head screwed on right when it comes to risk.
Now I want to make it clear, I’m against any of the regulation that is proposed. For that matter, I wouldn’t push for certification at the moment either. BUT, if there was NO OTHER ALTERNATIVE, either you get stuck with 10:1 leverage OR you get an option to be certified to use greater leverage through an exam, I’d take the certification option for sure - as I’m sure many would.
The exam is too good of an idea for the gov’t to think of on their own, but maybe you could publicize it yourself and they can steal your idea…i think they are competent enough for that maybe.
There’s even lots of ways to test someones knowledge, or at the very least, have the brokers prepare a little standardized pamphlet that they send to you when you open an account to explain how leverage works, in kind of a layman’s way so people know what kind of trading is VERY likely to blow out accounts.
I still say most traders should be able to carry on like nothing happened, but there’s definitely a few strategies out there that will be hampered or ruined and that is what makes me mad. And of course the whole trend of gov’t regulation, but I have a feeling that will come to an end after the DOW starts crashing and everyone starts blaming regulation & democrats.
The media will portray the people as extremists and the people will be crushed because the government has bigger and better weapons. Not just guns but the ability to freeze bank accounts.
Lol, that’s it - World War III will be started by Forex traders!!!
For every measure there is a countermeasure, and I’m sure that since FX brokerages are led by entrepreneurs, they’ll find a solution to to this problem somehow. Their business is at stake after all.
Depending on your strategy or if you are a player with multiple strategies this can be annoying; for example I tend to be a daytrader, but I dabble in swing trading and position trading. I could give a rat’s a$$ about hedging, so that’s not my motivation. This is more about buying at the bottom or selling at the top - before anyone tells me not to pick tops and bottoms, if you think about it, every time you open a position you are declaring a top or a bottom (setting a stop, etc), be it short term or long term, that is what trading is all about, pure and simple.
Leaving one contract at break even to run as far as it will go (if you’ve read [U]The Disciplined Trader[/U] and [U]Trading in the Zone[/U] by Mark Douglas you’ll understand my meaning), while using other contracts to chase price (these get sold/bought, you still have the one) Say you sold 3 contracts for EUR/USD at 150, and say 2 have been bought already at lower levels, say 145, but you still have the one up at 150. The idea with adding to and removing from a position allows you to still play the EUR/USD on a daily basis while you still have that one contract waiting for a break below say 140; and in the mean time, it would be nice to buy for the retraces, so you’re making money both ways at the same time. Apples and oranges I guess.
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.
We do swim in the same ocean (that’s the scary part), The big guys (soveriegn/banks/hedge funds, etc) are the whales and we’re either dolphins or plankton, depending on the individual trader. They don’t care about us? sure they do, but only in terms of how much money they can take out of our hides. The point was that instead of helping us, the new proposal would only put us at an even greater dissadvantage; maybe that’s the point, add another billion in revenue and ten points to share price of Goldman, by shearing many small account traders.
This is all about the United States government trying to replace our parents if you think about it, because they know what’s best for all of us. I hate to mix metaphors but this is a slippery slope, and the road to hell is paved with good intentions - just ask 20 million Russians and Ukranians, and
65 million Chinese hxxp://en.wikipedia.org/wiki/The_Black_Book_of_Communism
It’s important to know there are many rule changes proposed that would be good for the forex inudstry in the U.S. However, if a small portion of the proposed regulations passes – which would increase the security deposit on trades for investors to 10 percent – the U.S. forex industry would be eliminated and export the industry overseas.
GFT agrees with many of you on this forum and other forex dealers about this language being removed from the proposal. We encourage you to tell Congress how you feel this will affect you.
I agree with the 1st two items in the proposal but the max. leverage rule, that’s obviously another attempt to wipe out the retail Forex industry to protect the “Big Boys” in wall street their profit. They see that there are some of the us who are good enough to beat those big Forex market players in their own game and don’t like it so the only way to basically kick us out of the rink is to limit the leverage so we won’t have enough capital.
Make no mistake about it. This piece of regulation has nothing to do with protecting the investors or having us developing more disciplined strategies. If I want to be more conservative or develope more disciplined strategies, I can do this with or without any leverages. This is a blatant attempt to limit our individual freedom and choice of managing our own hard-earned wealth because the alternative would be handing over our money to those wall street boys for them to play.
Obviously, this is expected to happen sooner or later knowing that CFTC is a self-regulatory body financed by the Wall Street “Big Boys”. They killed the Retail Daytrading stock industry by raising the leverage requirement and now they are doing the same thing again to the Retail Forex Industry. We, Forex traders should really unite and not let this so called “CFTC”, wall street’s puppet kill this last thread of freedom that we individuals have, the freedom to manage our own money.
Honestly, when was the last time has CFTC protected or compensated any of us, small traders, when we have been conned, cheated and/or wiped out by some really unscrupulous retail forex brokers out there?
Unfortunately, the sheer number of retail forex traders that have lost 100% of their trading account has forced the CFTC’s hand. I wish for the professionals they would leave it at 100:1 (like if you used Currenex or something), but it looks like this is going to be approved and the glass ceiling will have officially landed on our heads.
