I know someone who does not let their broker account balances to move above $75,000 for security reasons. I am thinking that the amount would be within the limits of deposit protection for either the broker or the bank where the money is held.
What amounts are deemed safe by traders in general?
That sounds about right, like any other investment you dont want to have all of your money in one pot, nothing is certain especially in the world of finance, whether your money being stolen or your broker going bankrupt worries you, or even if its just the peace of mind that comes with not having all of your money floating in an account that isnt your bank account, there is absolutely no need to keep money in your trading account if you aren’t using it to trade with, for instance once you compound your account to the point that you are trading 1,000,000 lot trades ($100 a pip), you only need roughly $25,000 to margin each trade, so once you get to the point where you stop increasing risk and start having extra margin at all times, you can start capping your balance, maybe around 100k - 200k
so by the point where you become a very competent trader you simply risk more and keep most of your money in the bank (or invest elsewhere). Makes sense but bang goes the chance of compounding until your brokers account has 100 billion in!
check in with Dukascopy Bank, Swiss authorities protect deposits up to 100,000 CHF (swiss francs). Above 250,000 USD you can leave your money in one of these regular banks and trade off a credit note:
Liechtensteinische Landesbank (Switzerland) Ltd.
Barclays Bank (Suisse) S.A.
Bank CIC (Switzerland)
Merrill Lynch Bank (Suisse) S.A.
EFG Bank S.A.
BCP - Banque de Commerce et de Placement S.A.
CBH - Compagnie Bancaire Helvétique S.A.
Trades (gains/losses) are settled between Dukas and the regular bank against your funds at day end.
If Dukascopy crash, Swiss government have your back. Above 100k chf, use two or more accounts for full protection via your own PAMM setup. At 250,000 move it all into a regular bank as above.
No problemo!
I have a dedicated bank account that is ringfenced for trading. My profits go straight in there at the end of each month, I pay myself an income from that account, and those are the only movements on the account. I hold a much smaller sum with my broker, enough to cover my open positions. I always trade at a fixed risk, 1% risk per trade, and when calculating that I calculate 1% of the total across both my broker account and the dedicated trading bank account. So it appears to my broker as if I am risking a lot more per trade than I am, my account manager probably thinks me a cowboy lol.
It is not that I don’t trust my broker - I do - but keeping the sum in the broker account protects against any unforeseen circumstances in the industry, and having the bulk of my money in the bank makes it much easier to move income out of trading into other areas of my life, plus I earn interest on it. So having most of the trading account with a bank just makes day-to-day living easier, plus should my broker have any issues I’m not risking too much as a percentage.
Just my thoughts.
ST
Thanks for the info, can I assume that most of the 250+ would not be protected in the normal banks?
this is how I had planned to do it
This is right - sorry for the delay btw. Each jurisdiction has different provisions - one would have to make enquires with their bank manager with respect to protecting as much as 250 e.g. multiple accounts or switching over to a corporate entity instead where regulation protect more.
A credit note is a credit note even if it’s backed by 10 accounts. Takes a lot to hurt a bonifide triple-A bank to the point deposits are lost but you got to wonder, where do the bigger players keep their billions and how do they keep it all “safe”.
Excellent thread with great info. Subscribing for reference.
makes absolute sense doing it this way, and probably provides some sort of protection from emotional trading also lol