Largest account size permitted where brokers still allow 1:50 leverage

Broker Discussion Forex Brokers
1

Hi,
I was wondering if anyone knows how large an account can get, generally speaking, before a broker will insist on slashing your leverage. For example, small traders with 1k to 10k in their account have access to huge leverage because it is trivial for a broker to leverage such small trades. I’m curious, since leverage is inversely related to one’s account size, at what point your broker mandates that leverage begins to decrease. I know there are probably no “hard answers” to this since each broker uses their own discretion, however I’m assuming in the world of Forex their must be some general guidelines.

Examples

Account size of $10k - 1:50+ leverage no problem
Account size of $100k - 1:50 probably not an issue?
Account size of $1 million - ??

I’m also curious how things change if you move out of retail fx into using a prime brokerage, since they have direct access to such deep lines with the major banks (especially if they [I]are[/I] a major bank)

For example

Account size of $10 million with Deutsche Bank’s Prime Brokerage service - How much leverage is granted?

I’m curious about all of this since the ability to profit aggressively drops off when you are forced to go from say 1:50 leverage to 1:25 or 1:10, so I’m wondering what is the maximum account size one can have and still have access to 1:50 leverage.

I’m also curious what strategies exist (if any) that would allow someone to continue to sustain their profit levels/monthly % even if their leverage is drastically cut.

2

Hello Voyager

If your leverage drops, then you can basically increase your trade size.

Example:
Capital 100K with 1:50 leverage --> you make your trade size 1% of capital ($1000 per trade)
Capital 100K with 1:5 leverage ----> you make your trade size 10% of capital ($10.000 per trade)

Let s try this with different capital size and different leverage:

1-Capital 10K with 1:50 leverage ----> your trade size is 1% of capital ($100/trade)
2-Capital 100K with the same 1:50 leverage ----> your trade size is 1% of capital ($1000/trade)
3-Capital 1MML with a leverage of say 1:5 ----> change your trade size to 10% of capital ($100.000/trade)

In all 3 examples your risk is the same. If you changed your trade size to 1% in scenario 3, similar to example 1&2 then both your “potential” risk and reward (exposure and ability to make profits) drops ten fold. In order to standardize the risk and reward in line with the first two examples (1&2) you need to change the trade size to 10% of capital per trade.

3

Oh alright, so as the trade size is adjusted you can maintain the risk/reward level offered by the higher leverage amount. Thank you for pointing this out!!

4

Geez, won’t it be nice if one of your trading issues was my account size is to large.

And if your account was of that size why would you even bother trading. I’ld be off down the golf club every day and letting the pros earn their keep.

Got a few bob you can lend Bob so he can boost his pittance account bro?

5

If you have an account somewhere like “Interactive Brokers”, margin requirements on the major currencies are typically 2% (50/1 leverage) or 2.5% (40/1) without [U]any[/U] limitations on account-size. On minor/obscurer currencies, it can be as high as 5% (20/1) or even higher.

To an [B]actual[/B] broker (someone who executes trades on your behalf in the underlying market - in the case of forex, that’s the interbank market), the size of your account and positions isn’t relevant at all: they’re simply providing a service in exchange for a commission. They’re not themselves directly involved in the transaction.

To someone [B]pretending[/B] to be a broker (i.e. while themselves holding the other side of your position), of course it can be a huge issue, and the answer varies enormously from “brokerage” to “brokerage”.

Many “forum misunderstandings” on this subject arise because people often don’t distinguish between those companies who are actually brokers, and those (like the overwhelming majority of those mentioned in almost every thread in this forum) who are [U]pretending[/U] to be, while actually trading against their own customers, holding their customers’ deposits, and making up and interpreting all the rules governing the transactions, too.

As your account balance and position-sizing grows, you’ll definitely (for one reason or another) want to use an actual brokerage; when you do, position-size and account-size will no longer be relevant: it will be only the interbank market’s supply and demand that determines how your orders are filled.

Your own trading volume won’t have any noticeable effect on that. In theory, if 15 or 20 non-institutional traders all tried to trade something like 200 lots at exactly the same time, it might [I]possibly[/I], occasionally, move the market by half a single pip, but that’s about all the effect it can have. In other words, it’s never realistically going to be much of an issue for any of us. :slight_smile:

Edited to add: in short, if your account is “too big for your broker”, it probably [U]isn’t[/U] a real broker, but a [I]counterparty market-maker[/I].

6

With a market maker, i would assume you are more likely to get your price since they trade the opposite of your position, aka ‘buy’ your ‘sell’ orders and vice versa. With ECN, wouldn’t you be likely to get large slippages with large lots due to the system needing to match you with other traders, and having a potential of not enough traders looking to ‘buy’ your ‘sells’ (or vice versa) at the price you are looking to grab?

7

The reality is that it works out exactly the opposite way to this. The magnitude of the discrepancy between market sizes effectively overwhelms all the other considerations. You’re far more likely to get delays, requotes and other problems if you’re “betting against an individual”.

8

Thank you!