Proposed NFA Capital Requirement - page 62
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Wake Up and Smell the Coffee
Please don't take this "filling complaints " thing too seriously, the decision is already made and they know as well as we do how damaging is it for both traders and brokers, and they don't care ,what they have in mind is preventing the currency market from reaching the extreme level of volatilityit reached back at the heat of the financial crisis ever again .
In case you don't remember several countries in the G8 and the G20 meetings back then objected to the high level of volatility in the currency market during the crisis ,Japan and the Euro zone specially ,and they said that steps should be taken to avoid such things in the future , well there you go.
So let me tell you what that means for us:
1- This new proposition should be seen as a part of the "fixing the banks" bull shet and it will effect the worldwide forex market as American Banks are major liquidity providers , so even if you're trading with a broker outside the US, you're not safe from the effects ,small time bucket shops might be able continue providing 100:1 but the real brokers whom transactions are made in the real market will be forced to change their leverage .
2- Other countries will certainly follow the steps of the US as "fixing the banks" is a G8 policy.
3- This will decrease the volatilityin the market making it harder to trade and make money specially with 10:1
Thanks to nmx.
The matter is more clear now. There is something to thinking about
and be prepared for trading under new conditions.
A very stupid idea
Don't be confused by the rhetoric here. This is a nonsensical idea and does absolutely nothing to reduce the risk to any investor. As has been noted many times previously, one can just as easily wager the entire account balance at 10:1 as at 100:1.
This proposal actually reinforces the urge to place larger size trades simply to make the trade worthwhile. By the time you cover the spread and then account for swap rates, is there a reasonable expectation of return left? I believe many traders will think not.
Do the math. If you are trading with a 3% total account risk at 100% margin, you will now have to risk 30% of your account to make an equal trade. How in any way possible does that help an individual trader?
Remember, MARGIN DOES NOT EQUAL RISK. The size of your trade and the size of your stop is what determines your risk.
In the end, this is a stupid idea with no basis in reality for the desired outcome. It is another example of supposed regulations to help the small investor that instead does him great harm. Just as when they raised the margin requirements a few years back for equity trades, it simply forced a lot of investors out of the market. I believe that is exactly what big government and big banks want. They want us to to send our money to them to manage at exorbitant rates and fees because obviously we are all too stupid to make decisions for ourselves. And when they lose it all we again have to bail them out with our tax dollars.
How about for once, government keeps its dirty nose out of our business and lets the free markets be free.
Steve
Don't be confused by the rhetoric here. This is a nonsensical idea and does absolutely nothing to reduce the risk to any investor. As has been noted many times previously, one can just as easily wager the entire account balance at 10:1 as at 100:1.
This proposal actually reinforces the urge to place larger size trades simply to make the trade worthwhile. By the time you cover the spread and then account for swap rates, is there a reasonable expectation of return left? I believe many traders will think not.
Do the math. If you are trading with a 3% total account risk at 100% margin, you will now have to risk 30% of your account to make an equal trade. How in any way possible does that help an individual trader?
Remember, MARGIN DOES NOT EQUAL RISK. The size of your trade and the size of your stop is what determines your risk.
In the end, this is a stupid idea with no basis in reality for the desired outcome. It is another example of supposed regulations to help the small investor that instead does him great harm. Just as when they raised the margin requirements a few years back for equity trades, it simply forced a lot of investors out of the market. I believe that is exactly what big government and big banks want. They want us to to send our money to them to manage at exorbitant rates and fees because obviously we are all too stupid to make decisions for ourselves. And when they lose it all we again have to bail them out with our tax dollars.
How about for once, government keeps its dirty nose out of our business and lets the free markets be free.
SteveHi Steve,
you are absolutely right, as i have been damaged last year big time by the stupid and senseless rules forced by the NFA regarding the hedging, that it was prohibited and at that time, I had several big trades running with a large drawdown, and hedged positions to avoid bigger drawdown, until the direction changes.
when the rule was applied, my positions was closed automatically, both, long and short, of course the short ones were in profit but it was not me to close the positions, although my account had enough margin.
I believe too, that these rules are never created to protect small investors but damage them to give their money to banks to manage it, and maybe also to help some brokers to make more money, as some does not place the funds in the forex market but hold it and and eat it up with trading conditions in their favour. i.e. when you want to close a position that it is in profit, the execution takes time, sometime up to a minute, and takes back some pips of the profit etc.
But I also see that they sometime note that they put a senseless rule and losen it afterwards, as for instance ibfx now allows hedging again in intraday trading.
cheers
Please don't take this "filling complaints " thing too seriously, the decision is already made and they know as well as we do how damaging is it for both traders and brokers, and they don't care ,what they have in mind is preventing the currency market from reaching the extreme level of volatilityit reached back at the heat of the financial crisis ever again .
In case you don't remember several countries in the G8 and the G20 meetings back then objected to the high level of volatility in the currency market during the crisis ,Japan and the Euro zone specially ,and they said that steps should be taken to avoid such things in the future , well there you go.
So let me tell you what that means for us:
1- This new proposition should be seen as a part of the "fixing the banks" bull shet and it will effect the worldwide forex market as American Banks are major liquidity providers , so even if you're trading with a broker outside the US, you're not safe from the effects ,small time bucket shops might be able continue providing 100:1 but the real brokers whom transactions are made in the real market will be forced to change their leverage .
2- Other countries will certainly follow the steps of the US as "fixing the banks" is a G8 policy.
3- This will decrease the volatilityin the market making it harder to trade and make money specially with 10:1If the aim is to reduce volatility, then the only thing that would reasonably do that is for the countries to enact currency controls and intervene in the market. At that point, we go from open markets to closed markets.
The leverage proposal targets retail forex trading. Retail forex trading makes up a little over 3% of daily forex volume (according to stats cited by FT in their article), a drop in the bucket is being targeted here.
The proposal does not affect the leverage in the futures market, which would be higher than in spot if the proposal passes. And the proposal does not affect the leverage at which banks can trade with each other in the OTC market.
...
There is a proposed law in California to eliminate free parking EVERYWHERE!...Their Excuse - people drive TOO MUCH...I guess they want to deflate any kind of business activities in the country that consumes 25% of world production of oil....peak oil anyone?
Are you serious??
I got a great parking spot in downtown Hollywood! Next thing I know, you'll be telling me my Mary Jane card isn't valid anymore, too.
Haha, on a side note, does anyone have any new insight on the proposed 10:1 leverage rules by the CFTC? How serious is the possibility of this occurring? I've been hearing about it forever, but I just wanted to know what you guys on this board think.
Are you serious??
I got a great parking spot in downtown Hollywood! Next thing I know, you'll be telling me my Mary Jane card isn't valid anymore, too.
Haha, on a side note, does anyone have any new insight on the proposed 10:1 leverage rules by the CFTC? How serious is the possibility of this occurring? I've been hearing about it forever, but I just wanted to know what you guys on this board think.This proposal WILL HAPPEN unless we all email secretary@cftc.gov and tell them to keep their hands off our leverage!
Fight the Power
CFTC has received 7k comment letters. We need to keep up the pressure everyone. Contact the CFTC today!