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

[hazelj80]

Without wanting to offend anybody: Thank God I am not a US citizen.

Over the last 20 years US Governments, no matter whether Republican or Democrat, have shown a regrettable tendency to regulate (not to say supervise or control) every single tiny aspect of their citizens’ daily life. America just isn’t fun anymore; and (sorry to say it) America just isn’t FREE anymore.

I can understand the Government’s desire to protect its citizens from harm … that is a Government’s ‘job’, after all.
But there is a difference between taking measures to ensure a fair and secure environment for everybody and regulating every single thing.
The CFTC seems to think that the average US citizen is too dumb to make sound financial decisions.
Granted, many laymen have lost their money trading forex; but instead of educating them how to go about it properly, rules which are harming the whole retail industry are being introduced. And a weakened or wiped-out retail industry means less revenue for the Government as well.
In conclusion, the measures already taken and those proposed hurt everybody, without achieving anything positive.

My suggestion would be:
Let the CFTC create a simple webpage where people interested in trading forex retail have to pass a test, making sure they fully understand the concepts of leverage, margin and whatever the regulators feel is vital for safe and fair trading.
This would help traders (they can trade properly), brokers (they can earn money) and the Treasury (they increase tax revenue).
I think a ‘Retail Trader’s License’ would be simple to introduce and beneficial to all sides involved.

Cheers,
O.

THIS.

If you can’t even figure out what leverage you are effectively using knowing your stop loss and entry price, why the hell do you think you need to even open a live account?! Lack of education is what makes people loose! Make everyone take a test and let them have whatever leverage they want after that. Then it’ll really be the traders own faults! I’d do it.

[utah2342]

Thank goodness we are still 50:1…

[bennyfx]

Guys I very much doubt this will happen, look at whats going on in the rest of the work, how can CFTC force more brokers offshore, the answer is they wont. Why would you when the Obama Admin makes so much from taxes.

[SDTrader]

I just was stung by the demise of PFG Best. Would you mind sharing what broker you use and if they are an ECN broker?

Thanks for your time.

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.

[system]

I wrote a letter and made a few points:

1. 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.

actually that is incorrect. short term = ok to use high leverage. the longer the expected trade duration, the lower the leverage you should use.

now, while i disagree with someone REGULATING how much leverage a trade should use, i agree that most traders SHOULD only use 10:1 anyways. 100:1 gets to be quite dangerous if/when you have a 5-figure or larger account balance. think: 10k balance, at 10x leverage, means 100k position, means $10USD per pip of movement - up OR down. same account with 100x leverage is a 1M position, which is a $100USD per pip movement. won’t take a lot of pips going the wrong way to blow half of your 10k account at that rate!

unless all of you like to fund your accounts with no more than $1000 and trade as if you actually had $10k in there (because you’ve got the other $9k in your neighbourhood bank account anyways).

my take is - SHOULD NOT be regulated, but traders SHOULD limit their behaviour to that level anyways.

[PipWright]

Im all about the US government keeping their hands out of my pockets. They already are in them deep enough as is.

If I want to blow my account in one trade with 500:1 leverage on 2 standard lots, no SL, held by some obsure unregulated broker, I should be able to do just that.

Its just depressing to know that the greediest financiers and politicians have to swindle the people through the hidden tax of inflation.

[TopsandBottoms]

First, I live in Canada, but I use a US based broker ~ Capital Gains ~ or forex.com.

[serioustrader52]

They should limit it to 5:1 and they should make anyone that has never been profitable only trade with 1:1 It might make some people THINK instead of gamble, double up, and do all sorts of crazy stuff that just makes their account hit 0 faster.

if you need leverage then you probably dont have enough capital to trade full time to begin with.

[shofik23]

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.

[fxnayeem]

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.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.

[ForexNewbie1]

Im trading trendlines and i can use 10.1 leverage if i wanted but i do not have the capital to do so and even if i did i would still prefer the 400/1 leverage im using right now. I know how to control my risk, i have set stop loss and take profit on every single trade i make. The reason they want to lower the leverage is because they feel short term that the econmy will suffer because of successful traders. Traders who are making $10,000 per day are hurting the economy in their eyes as few of them as there may be. They want to control how much money us traders make and by lowering leverage they can do this. Luckily for me im in the UK so this wont effect me. And if it ever did come to the Uk, well i just hope i have made my first 2million by then

[ForexNewbie1]

i like to us 1:1 it is less risk and you don’t worry as much

If you use a proper stop loss and take profit you can trade 1000:1 leverage, doesnt make much difference if you use proper money management and trade lots which match your equity.

[Forexia]

Im trading trendlines and i can use 10.1 leverage if i wanted but i do not have the capital to do so and even if i did i would still prefer the 400/1 leverage im using right now. I know how to control my risk, i have set stop loss and take profit on every single trade i make. The reason they want to lower the leverage is because they feel short term that the econmy will suffer because of successful traders. Traders who are making $10,000 per day are hurting the economy in their eyes as few of them as there may be. They want to control how much money us traders make and by lowering leverage they can do this. Luckily for me im in the UK so this wont effect me. And if it ever did come to the Uk, well i just hope i have made my first 2million by then

No the [B]real[/B] reason why the CFTC lowered the leverage rate is because they want to suppress the Spot Forex industry in favour of the Forex Futures industry which is the one that’s paying for CFTC. The futures dealers contribute fees to both CFTC and NFA that stands for National’s Dealers Association. So when they see that the Spot Forex industry is getting more popular and is overtaking the Futures industry, of course they want to do things to quash the competition to protect the Futures industry as well as their own best interest by lowering the maximum leverage ALL in the name of “protecting well-being of individual investors from unnecessary risks” like we are all idiots who don’t know how to handle our own trades.

Ain’t politics fun?

[pips4christ]

well its down 50:1, and i hope it doesnt go down any lower. and thats just for the US. seems like another government control thing to me after Obama took office

[ForexWiseGuy]

The NFA also wants to ban credit card / pay pal deposits. What gives?

[bravehoststamps]

The NFA also wants to ban credit card / pay pal deposits. What gives?

FX Choice or FinFX are your options. I quit using US brokers ever since the CFTC lunacy came into force back in 2010.

[tonyro44]

Using leverage is really smart, however not everyone doesn’t have the discipline to do that.

[bravehoststamps]

Using leverage is really smart, however not everyone doesn’t have the discipline to do that.

Those could always opt-in for smaller leverage rather than being forced by the government to do so.

[pips4christ]

unfortunately for those in the US, they are not allowed to have an account with a non us broker, unless of course they grandfathered in and signed up with a non us account BEFORE the total ban took place. (i lucked out, i managed to sign up an account with Loyal Forex, before they were prohibited to allow us clients anymore. I don’t know what the big deal is? it is for sure lunacy like you said

[bravehoststamps]

unfortunately for those in the US, they are not allowed to have an account with a non us broker, unless of course they grandfathered in and signed up with a non us account BEFORE the total ban took place. (i lucked out, i managed to sign up an account with Loyal Forex, before they were prohibited to allow us clients anymore. I don’t know what the big deal is? it is for sure lunacy like you said

FX Choice and FinFX continue opening accounts for the US customers at this time.