How badly do you want to know the answers here i.e. loads of reading!!! LOL!!!
Here’s a start (link below). I do seem to remember something about this though i.e. there is a certain minimum amount required by law. But at the end of every trading day the capital requirements differ i.e. at any one given time a broker dealer has to have sufficient capital to make good on their net exposure. Something like that. I remember this now because that’s what happened during the financial crisis.
If you look through that document it may answer your question. There’s different capital requirements for broker dealers that actually hold funds and those that don’t.
Thanks. I read through briefly, seems for me it describe how much regulation ask from a broker to ‘have’ but does not mention ‘why’ ECN broker should have that much capital. Thanks for posting it.
Either you’re not reading my posts or you’re taking the pi*s because I’ve covered this already in depth.
This above being noted though:
For the record there are brokers that allow you to place GUARANTEED stops. But you pay a handsome fee for the privilege. In other words: my broker (for instance) will execute your stop at your exact price no matter what but there is a fee for this. In addition: this option is not always available and is also only available on certain markets.
Thanks. I actually read this and heard that some brokers will offer it. But if they activate this guaranteed stops, you lose the ability to hedge in case you need it in some part of your strategy. I do sometimes try hedge and this will eliminate the possibility for guaranteed stops. Also, I never have seen claiming ECN brokers offer this. This guaranteed stops seen in SB/MM brokers most.
That’s true obviously i.e. the brokerage is prepared to take the knock bearing in mind that they’d be unable to execute the order at market because price will have moved too much in the case of a sharp move. That’s why they’re not always available and only available on certain markets. But let me say this: not all market makers are thieves and thugs.
As for hedging: well that’s been stopped anyway (at regulated brokers) i.e. you cannot be long and short the same instrument at the same time. FIFO rule. Look it up.
Not true… the ability to Hedge depends on Country / Regulation. I (ASIC - Australia) can hold buy and sell positions on the same instrument on any TF and quite often do… used wisely it can be better than a stop… Look it up.
A whole demonstration of the technique was discussed here and as usual any discussion involving stop losses here on BP almost descended into a sh*t fight. The FIFO rule as I understand is only applied in the US of A …
You are both quite correct i.e. USA only. FOR NOW.
I am in South Africa yip. UK broker though.
I’m certainly no expert on hedging though (it being permitted or not is beside the point to me). Most new traders (myself included at the time) will hedge to try get out of jam that they’ve gotten themselves into. Usually turns out to be nothing more than a stay of execution really. Eventually the trader will cave and close the hedge at a loss. But without having read about the technique above (which I will) I can only imagine that’s what the sh*t fight ended up being about i.e. disagreement on what I’ve just said. But I’ll look it up!!! LOL!!!
@dpaterso, The LP’s (Banks) don’t like the idea of Traders being able to slip away from a losing trade with their funds intact, hence hedging (for whatever accounting reason they use) will eventually be banned from the Retail FX Markets
Also to prevent HF Bots that trade both up and down from getting in on their game. (See Below)
0.01 Lot positions, over roughly 30 days generated ~$2000 using a Buy and Sell opened at the same time. Disclaimer: Generated $4500, with $2500 of DD when Close All was action-ed… $2000 Net.
If you take a look at that thread of Clint’s (the CFTC thing): looks like to me that the industry worldwide is slowly but surely adopting the CFTC rules. With the (not so new anymore) ESMA margin rules they’re already more than half of the way there. I know it doesn’t endear me to people but I don’t think it’s a bad thing really. But then again it suits me to say that i.e. I’m for sure prone to over trading and even although I may have improved over the years the temptation is always there. With these margin requirements that I’m now subject to I don’t have a choice but to behave myself even if I let my guard down or have a weak moment. So for me it’s improved things. On the other hand if I were a successful scalper or short term trader then I guess I’d be singing a different tune.
I’d agree, Australia is really the last bastion of unspoiled financial… products… although the new Government is less likely to be forced into changing the markets from external coercion…
Not sure what you mean, which bit? Ok, got it… below rather than fill more posts…
The HF Bot was set to buy and sell each time one position was closed effectively following price action up and down the charts. I used 0.01 lots to keep DD and margin as low as possible… If I remember Margin reached a maximum of around $700ish…
The strategy was designed to ensure that Equity was always greater than DD, which the algorithm proved successful, so even though DD was climbing the equity was always higher, so If I Closed All at anytime the system was always in profit… Each position closed with ~$0.90 - $0.50 which over 30 days added up to a reasonable ROI on time and risk.
Margin per position was ~ $3.30 with from memory the highest amount of positions open was 170 at one time. There is obviously a little more IP that went into it… but that’s it in a nutshell.
For those that have followed some of my posts over the years (both of you…)… the basis of this system has been posted before, ridiculed, and trolled quite a few times by a few simpleton characters.
If nothing else and thanks to these margin requirements and rules for margin calls: a new trader that maybe doesn’t know what they’re doing can at least be left with SOME money in their account if they’ve messed up. Maybe give them time to pause and think as to where they went wrong and if they wish to continue. Unfortunately for me (and thousands of others I suppose) that point was only reached when the margin call came at ZERO funds left over (matter of fact I think I still owe some broker in Australia $17 or something!!! LOL!!!).
ESMA is good for you. But for me, I want all margin that broker can give me, I’d like 1:1000 but rarely a ECN broker offer this. I want even more, and I can make money by leverage.
Unfortunately, UK lawmakers making UK going backward every day, if Brexit happens, I hope UK get out of ESMA immediately. This will bring the large amount of cash flow to UK businesses.
Doesn’t make any difference… It is a low dollar risk system that I use (Live) when certain pairs are ranging and only certain pairs that move with in a set price structure…IP
Low spread definitely helps… your not relying on direction,not reliant on stops… so spread and stops are negated. The more Price Action whipsaws the better the strategy works…
