In 2020, due to the COVID19 pandemic, online trading (and gambling, for that matter) increased immensely. To be more precise, in the second half of the past year, in Australia alone there were 3.4 times more accounts opened at Forex and CFD brokers compared to the same period in 2019. That prompted the Australian regulator ASIC (the Australian Securities and Investments Commission) to introduce new regulatory rules for the local brokers.
Those rules are, essentially, the same as the ones ESMA introduced in the European Union back in 2018. Maximum leverage is being capped at 1:30 for major Forex pairs, 1:20 for exotic and minor pairs, gold and major indices, 1:10 for commodities and minor indices, 1:5 for stocks and finally, 1:2 for crypto assets. ASIC also introduced negative balance protection and banned trading bonuses which encouraged customers to trade excessively. Source
Personally, I think that regulation was inevitable, even if they say the pandemic prompted it. Who knows what other major jurisdiction will do the same in the coming year.
Every trader should know in which position he should enter the trade. If the entry in the trade is not right, then the emotion will work in the trade. And emotional trading is very harmful. I never trade on weekends because then the market is volatile. I always try to trade in the middle of the week.
I can’t say that I am surprised with these limits. I have been “investing in” cryptos for nearly a year now with no leverage, and starting next month, am planning to allocate up to 25% of funds to trade as opposed to investment. I define trade as “anything that has an exit timeframe of less than 3 months” and investment as “exit timeframe beyond 3 months”. So having traded Forex on and off for two decades, I intend to start with a maximum leverage of 4:1, but could live with 2:1. fortunately, I am not an Australian resident so will not expect to be restricted as such. But there is probably good reason that many brokers offer what they term as 3X long and 3X short trades. Time will tell.
First step is becoming skilled. For study you can start with babypips school. After that read different books on technical analysis and trading psychology. Along with study, practice in demo account.
That is a really good question. It should be considered as part of a risk management strategy and plan. If the trader’s plan relies on high leverage to achieve the target goal (for example - my goal is to achieve a 50% capital growth in a year) and the only way to achieve that is using high leverage, then the trader may wish to seek out an unregulated broker, at a higher risk than using a regulated broker where regulation requires a restriction on leverage.
This has been a topic of discussion in these forums many times, but I’ll add some content to this thread.
Those of us that have been utilising high leveraged accounts (1:200 - 1:400) will find that having your leverage cut down to 1:30 for the Majors, 1:20 for the Crosses, Metals, Oil, Indices etc. a total game changer… But there is a few ways around these ridiculous knee jerk regulations with minimal risk.
The margin needed to open a 0.01 lot position with 1:400 leverage was anywhere between $5 - 8 currency pair dependant. Margin requirements to open the same position in the over regulated 1:30 environment is $55 - 85. Quick math tells you that you’ll need a trading account roughly 10 times larger to trade comfortably (hold against margin calls) using 1:20 / 1:30 leverage…
Not all traders are flush with cash… Some trade CFD’s as a hobby or are maybe just trying to master the Black Arts of Currency Trading… Why deposit $5000 with a regulated Broker when you can still outlay $500 and use the same formula that may have been working for you pre ESMA or ASIC “Intervention”.
You can open an account with the most “reputable unregulated” Broker you can find and continue to trade with the higher leverage. This ensures you’ll be able to deposit less funds with these Brokers and still get superior bang for your buck against the over regulated mainstream operations…
You can deposit anywhere from $100 to $500 with the unregulated Broker of choice, which in itself is a risk management component of this game and withdraw profits when you hit a set percentage (Say 10-20%) or on a weekly basis, another component of risk minimalization. You will notice within the first couple of withdrawals whether your Broker is going to play you for a sucker…
A few tips should anyone wish to proceed down this path…
Do thorough due diligence on the Broker you choose… READ their Terms and Conditions.
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Ensure there is no withdrawal fees on their accounts. Frequent withdrawals will hurt your returns.
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Always have access to Charts from a regulated Broker available, if you think your unregulated Broker is playing fast and loose with the price feeds, you have something to compare it with…
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Just remember, you don’t have Negative balance protection outside of regulation so be careful not to trade News or Global Events… It could be very damaging.