Gotta love ET, where fractional reserve banking is bad, but unlimited leverage for traders is good.
10:1 could be the new leverage rule
- Thread starter Surprise
- Start date
Gotta love Banker apologists - unlimited leverage for them, to hell with everyone else !
As long as we've got a fractional reserve system, I'm all for leverage.
It's total hypocrisy for Banks/BD's/IB's to gear themselves 30:1, then deny retailers access to that same gearing!! It's bullshit and totally rigs the table in their favor.
Excluding the safety of funds aspect (ie depositing less with the broker and leveraging), when would it be necessary for the average retail forex trader to have access to anything greater than 10:1?
Wasn't misuse of leverage the major cause of the recent financial crisis? Is there a lesson to be learned from what happened maybe?
Wasn't misuse of leverage the major cause of the recent financial crisis? Is there a lesson to be learned from what happened maybe?
lol, it's only the resident troll, he's insignificant.
I think you missed the point slightly, I wasn't suggesting overleveraged retail forex traders were the cause of Lehman's demise, but there's a lesson to be learned from what happened, or don't you think so?
I notice you didn't even attempt to answer the question though (don't worry you're not alone as no-one else has either!), but in the absence of any practical reasons for using leverage in excess of 10:1 maybe means there actually aren't any to support all the opposition to the proposed cap?
It's obvious why brokers like to offer ridiculously high leverage, but what about the average trader, why does he need it?
Not everyone wants their buying power tied-up in one trade.
Swing, position and intraday traders hold multiple positions, across pairs, which is rendered impossible or ineffectual at 10:1 leverage.
Even scalpers (all-in, all-out), trade with tight stops. A 20 pt stop (2% rpt @ 10:1) is far too wide during regular market conditions. A waste. Trianglar arbitrage at 10:1 is like watching paint dry.
Retail Forex accounts for ~4% of daily volume. What's the point? Seriously. A US cap would do jack squat in terms of muting global volatility, and decimate American brokers as bucketeers would move accounts offshore. The CFTC knows that.
The meltdown was largely caused by banks geared @ 30:1 in a dead-end market, underwritten by derivatives which compounded losses, all made possible by an irresponsible FED funds rate @ ~0%, with the tacit promise of Moral Hazard down-the-road if things got ugly.
Yea, leverage and moral hazard was the problem - ON THE INSTITUTIONAL BANKING SIDE. Not the retail mom-and-pop crowd. We're a mere hiccup in trading volume. And Helicopter Boy doesn't cut me a check when I make a bad trade!! How about you ?!??
Now, we've got Wallstreet having US regulators throw retailers under the bus to assuage the angry mobs "Wallstreet is getting theirs".
Can you see how twisted and fucked up that is? Pardon my language.
Either we all get leverage, or nobody does.
Either we all get 10:1, or nobody does.
Wallstreet are the LAST GUYS in the room we should entrust with the *exclusive* rights to gear heavy.
Yet, here we are. It's completely backwards. A total mindfuck.
Those are two valid arguments.
It's not that I will use 100-1, I just don't want it taken away so that some do-gooder in Washington can gain votes.
It's not that I will use 100-1, I just don't want it taken away so that some do-gooder in Washington can gain votes.
Agree - on both points. Personally, I tend to use only 20% of leverage given but I like to have that reserve in usable margin.
At this point (inferring from how easily the last de-leveraging took place without any of the FXDC schmucks raising hell) the real question is not whether the 10:1 leverage becomes the rule but how much will the UK divisions also lower their leverage -- this is the real concern IMO
I know you don't use stops, so you are probably not aware that by limiting your risk through a stop order leverage is not synonymous with risk.
If you compare 2 trades, one with a 20 pip stop and one with a 100 pip stop, you can use 5 times more leverage in the first trade (compared to the 100 pip trade) and still have the same risk. 5 times more leverage, same risk. See?
Personally i typically use between 5x and 20x - depending on how close i can place the stop. I never payed much attention to margin, since 50:1 is plenty and i never got remotely close to that. With a 10:1 limit in the usa, i'm headed for an UK firm.
Seems to have changed to 10:1 ... It doesn;t seem to be that way with brokers abroad.