thanks for the info LethalXxXDose, i am beginning to understand the situation.
I hope that the frustration I implied in my posts wasn’t mistaken for frustration towards you nazmulpeash. You are doing the right thing by educating yourself. I still have a lot to learn myself. Keep moving forward and keep in mind that you are responsible for your winnings and losses, not the market.
Wonder if there is any updates on this issue. I hope CFTC has understood the issue better and agrees with us traders, who are really on the frontline of trading industry, that Education and Regulations is the key!
And Margin Regulations is really not only an ineffective but harmful band-aid solutions!
Just want to comment on this: Education IS readily available to any new traders who are starting out. Nowadays pretty much all brokers, except the really unscrupulous bucket shops, all offer resources, website links, videos and webinars to any newtraders who want to trade with them. And there are independant websites like Babypips.com that offers step-by-step structured education materials teaching new traders how to trade prudently and profitably. So education is there, any sensible new traders who are starting out, all they have to read through these resources and they will be fine. Language used in those Education resources is not difficult to understand. The traders just need to read throught them which doesn’t even take all day.
Those traders that we hear that blow their account in couple of days and end up having “their lives ruined” are the losers (pun intended) who don’t bother to do their homework or even get to know what Professional Trading is like. They think Day Trading is a “Get Rich Quick” venture that allows them to become instant millionaires. And then they become the statistics that those CFTC looks at even though they are really a minority among traders.
Like I said before, you can’t and shouldn’t create regulations for the losers at the expense of the majority who try to do things the right way.
Im Newbie on Forex ( 6 months) please post whats your next step after 10:1 … If you switching to UK please post which broker will you trust
Thank you…
By the way for my calculations :
in a $2000 account
With a 20% risk
You will use $400 to buy 4000 units at 10: 1
so even if you get 100 pips in a trade you just make $40
LOL thats insane … I will not risk $400 to make $40 I rather to keep working 40 hours a week
Thats my opinion and remember Im a newbie so if you disagree please post why
[B]richhope,[/B]
You’re confusing margin with risk.
You correctly calculated 20% of your account balance: 20% of $2,000 is $400. And you called this figure “risk”.
But, then you used that figure as “margin” in the rest of your example.
Risk is usually defined as the loss you would take on a trade, if your position were to be stopped out.
Let’s look at a typical short-term trade — this could be a day-trade, or (more probably) a swing trade.
Let’s say you have a $2,000 account, [B]and let’s say the 10:1 leverage limit is in effect. [/B] You want to take a position involving a 75-pip profit target, and a 40-pip stop-loss. And you [I]really do[/I] want to risk $400 on this trade (which happens to be 20% of your account).
From your 40-pip stop-loss and your $400 risk amount, we can calculate that your position size will be 100,000 units of currency. And, immediately, we know that [B]you can’t place this trade[/B], because your account is not nearly large enough to cover the required margin.
With the 10:1 leverage limit assumed in this example, you would need $10,000 in your account to cover the margin on a $100,000 position; you would need $30-$50 in your account to cover the 3-5 pip spread; and, you would need $400 more in your account to cover the $400 loss you might take, if your position were to be stopped out. Altogether, that’s a minimum of $10,430 needed in your account, in order to take this trade. And your actual risk-percentage would be $400 / $10,430 = 3.84%
You can do the math and confirm the following numbers:
[ul]
[li]In the example given above, if the maximum leverage available to you was 20:1, you would need $5,430 in your account, in order to take this trade. Your actual risk-percentage would be 7.37%.
[/li]
[li]If maximum available leverage was 50:1, you would need $2,430 in your account. Your actual risk-percentage would be 16.46%.
[/li]
[li]If you started with exactly $2,000 in your account, and put on the trade described above, your actual risk-percentage would be exactly 20%, and you would be using a little less than 64:1 actual leverage. That is, you broker would have to allow you at least 64:1 maximum allowable leverage, in order for you to place this trade in your $2,000 account, risking 20% of your account on the trade.
[/li][/ul]
————
Regarding moving your account off-shore, I would recommend FXCM-UK. That’s where my accounts have been since last summer, and I’m completely satisfied with this arrangement. Other members of this Forum might have other suggestions.
I hope that answers your questions.
Clint
You just give me a great math class … after 6 month here and there it was still a little hard to understand the terms margin and risk , leverage . In just 1 reading minute you resume the terms and all came clear …
AND YOU ASK ME IF YOU ANSWER MY QUESTIONS …
Of course you did … Thank you
However this put me in a new position …
My plan was already set … $2000 , 100:1 with a 20% risk in Alpari US account which I’d been using as demo for the last 5 months … Now the plan is useless and 50% of the work with this platform was lost if time …
Well here goes my questions I hope you can answer as well .
Does FXCM-UK accept users from USA . In other words and excuse my ignorance . Do they allow deposit and withdrawal requested from USA (Alpari Uk won’t )
How about Etoro or any other broker that is not regulated by the CFTC… Do they need to follow the 10:1 leverage
Will you risk your money with any broker not regulated by CFTC
Your help or anyone commented in this post is very much appreciate
My MT4 Stadistics :
mt4pips.com
UPDATE:
I DID CHAT WITH FXCM AND YES IF YOU SIGN UP ON THE USA RESIDENTS THE NEW LEVERAGE 10:1 WILL APPLY
SO YOU NEED TO SIGN UP ON THE UK HERE IT IS THE LINK :
secure4.fxcorporate.com/fxtr/?ib=fxcmuk
AND YES ALL THE deposit and withdrawal WILL BE PROCESS THE SAME THAN US
[B]richhope,[/B]
I’ve quoted three of your questions, above.
[B]1.[/B] I see that you already have found the answer to the first question.
[B]2.[/B] Regarding your second question, all forex brokers outside the U.S. are beyond the reach of the CFTC and any regulations which they might issue in the future.
There are many people in government who believe that effective financial regulation will be achieved ONLY when all countries adopt the same regulations — but, this is probably years in the future. For now, you can shop the world for the best place to domicile your account.
If the UK were to become customer-unfriendly toward forex traders, we might look at Hong Kong or Singapore as better places to trade.
As for the 10:1 leverage restriction, it has not become law, and I personally believe that it will not become law. It is ridiculously extreme. The forex community has made it clear to the CFTC that their proposal, if enacted, would result in the death of the retail forex business in the U.S.
My guess is that the CFTC will adopt a half-way measure, and restrict leverage in U.S. retail forex accounts to 50:1. This would be somewhat less stupid than 10:1, but stupid nevertheless. There would be no reason for a forex trader in the U.S. to struggle with 50:1 leverage, when it’s so easy to trade in the U.K. with 100:1.
During the Open Comment period in the spring, I wrote to the CFTC and suggested MAINTAINING the leverage limit at 100:1 on the major pairs, and RAISING the leverage limit back to 100:1 on all non-major pairs (which are currently limited to 25:1 leverage). I will be very surprised if they take my first suggestion. I will fall off my chair if they take my second suggestion.
[B]3.[/B] Regarding risk associated with trading outside the U.S., there are some countries where I wouldn’t consider opening a forex account. But, the U.K. is as safe, or safer, than the U.S. Almost all financial services in the U.K. are regulated by the British Financial Services Authority. They’ve been overseeing everything from bank accounts to forex accounts for a long time, and they have a sterling reputation (excuse the pun). In the U.K., your forex account will be segregated from all other customer accounts, and from the broker’s own funds, in an insured bank account, so that even a total bankruptcy of the broker will not result in the loss of your account. That is NOT YET the law in the U.S., although it should be.
— — — —
One last thought: you really need to re-think that 20% risk level you keep talking about. Unless you are some sort of forex trading genius, that level of risk is going to eat your account at some point.
If your WIN-RATIO is anything less than 100%, at some point, a string of 20% losses will wipe you out.
Now I have a relieve . I was even worry as I post before in another threat about the brokers and loosing money . I feel more comfortable now opening an account in Uk , Actually I’d been using the FCMC MT4 platform since you told me and it is as good as any other .
I hope CFTC hear you and if any limit will be imposed they do it your way or anything that make sense , I have a minimum Knowles in the Forex market and now I can see how disastrous the 10:1 will be … I can’t believe the CFTC can’t see it …
About the 20% risk level it was just a number I pick to get an idea of how much U need to spend to get a minimum profit … However
I do have to learn more about money management… So far with the demo account I’m doing very good using an even higher margin but u are right a wrong trade could ruin all the work …
I would like to get an opinion from you when you have the chance check my stadistics :
All trades are very calculated using fibonacci and trendlines … No luck is involved on my trades 
Thank you for all your help
I like this thread. It ought to be made a sticky and a must read to all newbies.
So wots, um, the deal? When is this decision being carried out? Anyone know??
Here is a re-cap of facts relating to the forthcoming CFTC regulation of the retail forex business in the U.S.
[ul]
[li]In 2008, the U.S. Congress gave the CFTC authority to regulate the retail forex industry in the U.S.
[/li]
[li]For about 18 months after the enabling legislation was passed, the CFTC was busy increasing the Capital Requirements for independent U.S. retail forex brokers (from $1 million to $20 million, or more, per broker) — and, all things considered, this robust increase in capital requirements has proven to be a good thing for our industry. During this period, the CFTC gave no hint that additional regulations were forthcoming.
[/li]
[li]Then, in January 2010, the CFTC announced sweeping new forex regulations. This announcement took the entire retail forex industry by surprise. The new regulations were released as “proposed” regulations, with a 60-day public comment period set to follow the release, as required by law.
[/li]
[li]The public comment period (Jan 20 - Mar 20) gave anyone anywhere in the world the opportunity to comment in writing on the proposed regulations. More than 6,000 written comments were submitted, the largest response to proposed regulations in CFTC history.
[/li]
[li]Most of the comments submitted to the CFTC focused on just one issue: the proposed increase in required margin from 1% to 10% on all retail forex trades. And the overwhelming majority of those comments were negative on this issue.
[/li]
[li]The CFTC will consider the comments received. They have complete authority and sole discretion to do anything they want with the suggestions contained in those comments; they can adopt them, or ignore them, as they see fit.
[/li]
[li]After their review of the comments received, the CFTC will issue regulations in final form, and these regulations will become part of law. There will be no second comment period after the final regulations are issued.
[/li]
[li]The new regulations may be issued at any time between now and the fall of this year.
[/li]
[li]The new regulations will go into effect according to a schedule which the CFTC will dictate. Some of the regulations may be made effective immediately; some may be implemented over a period of several months.
[/li]
[li]There are many other provisions (besides mandated margin requirements) in these proposed regulations, and they are all aimed at curbing fraud and abuse in retail forex. Retail brokers, pool operators and trading advisers operating in the U.S., or soliciting business in the U.S., will be massively affected when these regulations become law. Others engaged in commercial activity in and around the retail forex industry will be affected to a lesser extent.
[/li]
[li]You, as a retail forex customer (trading with a U.S. broker), will be affected in two major ways by the final regulations:
[/li]
(1) Anyone offering you retail forex products or services will be required to give you complete, honest, and understandable information regarding forex in general, and their products and services in particular. These provisions are all good, and you should welcome them;
(2) Your ability to trade retail forex through a U.S.-regulated broker may be severely crippled by the proposed new 10% margin requirement. This one provision could essentially make all the other provisions meaningless. This one provision could essentially make retail forex in the United States meaningless.
As they say, “One [I]Oh sh!t![/I] wipes out all the [I]Atta-Boys[/I]”.
[/ul]
If you haven’t already done this, you should listen to Rob Booker’s webinar on the proposed CFTC regulations. We were first alerted to this by the poster who goes by the name stevoforex, back in February. The webinar is still available at —
TechSmith | Screencast.com, online video sharing, CFTC_Webinar
This webinar is more than an hour long. But, almost all the content is in the audio, not the video. So, you can turn up your speakers, and work on other things, without missing important content in the webinar.
There has been a lot of conversation on the various Babypips forums about the proposed CFTC regulations. Here’s a list of threads and blogs that you might want to read, or scan:
http://forums.babypips.com/free-forex-trading-systems/31774-will-10-1-leverage-destroy-your-trading-system-3.html#post163310
thread on the Free Forex Trading Systems forum, begun 1/17/10 by stevoforex
301 Moved Permanently <<< THIS IS THE THREAD YOU ARE ON RIGHT NOW
thread (sticky) on the Forextown forum, begun 1/19/10 by Pipcrawler
http://forums.babypips.com/newbie-island/31806-proposed-cftc-leverage-change-10-1-all-us-brokers.html
thread (sticky) on the Newbie Island forum, begun 1/19/10 by DodgeV83
http://forums.babypips.com/forextown/31887-how-cftc-became-u-s-retail-forexs-1-enemy-3.html#post164519
thread on Forextown forum, begun 1/22/10 by Forexwatchman
http://forums.babypips.com/melting-pot/31942-cftc-1-10-leverage-proposal-look-out-3.html#post165046
thread on the Melting Pot forum, begun 1/25/10 by Jeff Langin (4XRAT)
CFTC Changing Retail FX Rules in the US? | Forex Blog: Espipionage
blog, 1/31/10 by Forex Ninja
The CFTC is Listening?! | Forex Blog: Espipionage
blog, 3/6/10 by Forex Ninja
http://forums.babypips.com/newbie-island/32926-amount-leverage-really-matter.html
thread on Newbie Island, begun 3/7/10 by nUmbnUts
How High Leverage Affects Transaction Costs in Forex Currency Trading
lesson in the School of Pipsology
If the final regulations, to be issued soon, by the CFTC raise the margin required on retail forex trades above the current 1% amount, there will be a rush to close U.S. forex trading accounts, and move money offshore. You might want to beat the rush.
Long time lurker, first time poster. Just want to be clear on what’s happening. IF this 10:1 leverage cap does go through, what’s to stop me (a US citizen) from going to a broker in another country?
If nothing, then what stops all the brokers from leaving the US and going to Hong Kong, or wherever else?
Nothing.
Nothing.
Don’t know what kind of “lurking” you’ve been doing, but apparently you haven’t read anything on this thread.
Your question about individual traders moving their trading offshore has been discussed at length on this thread.
And the Rob Booker webinar specifically addresses the question of what will happen to U.S. retail forex brokers,
if maximum allowable leverage is reduced.
well the mass move is already underway…
offshore account
It ended up at 50 to 1 so it will cost about $2,500 (for me anyway) roughly to open up a 100k position and earn $10 per pip. wich for me before it was only $250 on usd/jpy , nzd/usd , aud/usd… eur/usd and gbp/usd were about $375 to $400 for a 100k. They will be 10 times more now.
The actual details if you are a US resident with an account overseas will come next week. Sept. 27th through Oct 1st. If you have not already heard from your broker. A freaking little 10k is gonna cost what a 100k cost to open!! $250 bucks for $1.00 per pip?
Whatever. Idiots are ruining this country!
By the way, did I mention …THIS SUCKS!
Your math implies that you currently have maximum allowable leverage of 500:1, and your leverage is about to be reduced to 50:1. Is this correct?
Where do you reside, who is your 500:1 broker, and where is that broker located?
Can’t argue with that!
I was told by my broker, IBFX, that US residents,coroporations can’t trade with offshore compainies. They said it was part of the new regs.
I dont see how they can regulate if someone in the US can do business with an offshore company that just doesn’t make any sense.