400:1 Leverage

TraderZones · Mar 31, 2009

Quote from FJMcC:

I think everyone needs to chill out a bit about Leverage levels. First of all, some people like to gamble and throwing 3 or 4 grand in an account and taking a shot at a score is the whole point of these Forex shops. One could even make the arguement that a new trader who has a negative expectation profile, would be better served by trying to make a big score off of a few overly leveraged trades than grinding out 100's of small trades. Kind of like if you want to win 10,000 dollars at roulette you have a much better chance of doing it by betting 10K once than 50$ 200 times.

Not everyone is trying to be a career trader, control volatility, and achieve an impressive Sharpe Ratio. Is this wise? Probably not, but this is America, for the time being irresponsibility with one's own money is still legal.

And of course, if one were truly responsible and very risk adverse, the higher the leverage offered, the safer your money can be actually. Let's say you were a client of Refco, you could have kept a token amount of margin in your Forex account, Purchased T-bills with your total risk capital, parked the Bills in a segregated and legally gauranteed Futures account, and made transfers back and forth to fund your day to day trading. I would wager there are more than a few Refco customers who wish they had done just that.

I guess it's easier to just decry low margin requirements, sound like a disciplined trader, and not think things through. All I can say is that I wish IB offered 1000 to one. I could trade real prices, with a true ECN, and by storing my base capital in a regulated futures account eliminate 99.99999999% of my counterparty risk!!!

Just my two cents.

FJMcC

Abuot the only thing correct in this post seems to be the spelling.

FJMcC · Mar 31, 2009

Quote from TraderZones:

Abuot the only thing correct in this post seems to be the spelling. [/QUOT

Sir, please explain to me what in my post is not true. I am wondering. Do some hobbyist traders not like to gamble and use huge leverage? In a game with an inherent Expected Value Deficit, such as roulette, dice, and trading if not skilled, is it not wiser to make one play than 1000? And if that is not true please use your obvious mathematical genius to demonstrate your point. Are United States Futures accounts not segregated and legally seperated from brokers general corporate funds? Has any trader ever been defrauded or been "gone bankrupt" on by the a registered FCM or the CBOT or CME clearing house? Can one not transfer money from one type of account to another (Forex, Equities, Futures) at IB? Of those three accounts which is the safest from a funds protection standpoint.

I happen to know the answers to all these questions, but maybe you know more, please help me.

Oh and by the way, if you would like to flip a coin against me and lay 1.01 to 1.00 over one thousand trials, please PM me, we can post up the money and get it on. You can pick the number up to 1,000$ per flip but you must complete at least 1000 trials.

******I will not flip once for a million though, even if you agree to lay 1.30 to my 1.00. Do you see why? Or are you just retarded?

By the way, I don't use spell check.

cabletrader · Mar 31, 2009

Quote from FJMcC:

I think everyone needs to chill out a bit about Leverage levels. First of all, some people like to gamble and throwing 3 or 4 grand in an account and taking a shot at a score is the whole point of these Forex shops. One could even make the arguement that a new trader who has a negative expectation profile, would be better served by trying to make a big score off of a few overly leveraged trades than grinding out 100's of small trades. Kind of like if you want to win 10,000 dollars at roulette you have a much better chance of doing it by betting 10K once than 50$ 200 times.

Not everyone is trying to be a career trader, control volatility, and achieve an impressive Sharpe Ratio. Is this wise? Probably not, but this is America, for the time being irresponsibility with one's own money is still legal.

And of course, if one were truly responsible and very risk adverse, the higher the leverage offered, the safer your money can be actually. Let's say you were a client of Refco, you could have kept a token amount of margin in your Forex account, Purchased T-bills with your total risk capital, parked the Bills in a segregated and legally gauranteed Futures account, and made transfers back and forth to fund your day to day trading. I would wager there are more than a few Refco customers who wish they had done just that.

I guess it's easier to just decry low margin requirements, sound like a disciplined trader, and not think things through. All I can say is that I wish IB offered 1000 to one. I could trade real prices, with a true ECN, and by storing my base capital in a regulated futures account eliminate 99.99999999% of my counterparty risk!!!

Just my two cents.

FJMcC

I made a similar point about safety of funds a few pages back (not as detailed but the basic idea is the same), I think it's a valid argument but as Ivan mentioned I don't think that's the motive behind the magnanimous offer these shops make of 400:1 leverage or the reason most people accept the offer

As for forex being an outlet for reckless gamblers out to make a fast buck you could very well be right, maybe that explains the high failure rate, but I wonder was that their original intention? For a gambler there's got to be more enjoyable ways to have a punt rather than in front of a computer screen watching prices flutter around aimlessly, casinos offer free drinks and more! Maybe the title 'trader' gives the compulsive gambler an air of respectability?

TraderZones · Mar 31, 2009

Quote from FJMcC:

Quote from TraderZones:

Abuot the only thing correct in this post seems to be the spelling. [/QUOT

Sir, please explain to me what in my post is not true. I am wondering. .

More...

I already covered that:

<i>Abuot the only thing correct in this post seems to be the spelling.</i> If you know simple set theory, you should have been able to figure it out yourself. And I used the misspelled About to reinforce what you got right.

Cygnus Atratus · Mar 31, 2009

http://www.blue-fx.co.uk 700:1

http://www.igforex.com/ 700:1

Both FSA regulated (light touch), very very similar websites.

And many more, some are clearly in trick jurisdictions ( Belize, Panama, Cyprus e.t.c) so your money is probably gone before you even trade. If any of you are ever desperate to use these guys, please use some type of prepaid debit/credit card. I bet by the end of the year someone will be offering an eye watering 1:2500 :eek:
http://www.100forexbrokers.com/high-leverage-brokers

FJMcC · Mar 31, 2009

Quote from TraderZones:

I already covered that:

<i>Abuot the only thing correct in this post seems to be the spelling.</i> If you know simple set theory, you should have been able to figure it out yourself. And I used the misspelled About to reinforce what you got right.

Ok, ok, you are too clever for me I think, thanks for the compliment though. Very rarely have I ever posted anything, about any subject, andd been almost completely right!!!!

P.S. Is it time to start bailing on the risk currencies for the short term yet

I think maybe it is!!!!!!!!!!!!

TraderZones · Mar 31, 2009

Quote from jkhek21:

400:1 leverage is some pretty incredible leverage to trade with, as one poster earlier said maybe it is suicide. However there is a great deal of people who are looking for 400:1 leverage in the Forex industry and if one firm canât offer then we can,

Others may offer 400:1 leverage. You however, are probably the only firm advertising it in bright red, 72-point font size, as if it is some kind of great benefit, rather than insane money management.

Smart traders prefer firms that don't attract clueless traders that might under the right conditions, imperil the broker.

milktruck · Mar 31, 2009

Quote from Cygnus Atratus:

I bet by the end of the year someone will be offering an eye watering 1:2500 [/B]

I would love to put on a huge position at a shop like this at 4pm friday with very little capital, spin the wheel that it goes way beyond what they can collect from me or make some serious coin and withdraw the winnings.

cabletrader · Apr 1, 2009

Quote from TraderZones:

Smart traders prefer firms that don't attract clueless traders that might under the right conditions, imperil the broker.

lol, you're insane if you seriously believe any bucketshop is going to put themselves in 'peril' by a) having that level of exposure or b) paying out if they've auto executed, they'll just bust trades!

FXCM did exactly that a few years ago after a ~200 pip gap on an NFP release, they just reversed everything.

Toooo funny

Here's what Refco's Daniel did 3 hours after the same NFP release on 6th August 2004, he reversed $94,800 of gains!

cabletrader · Apr 1, 2009

Quote from milktruck:

....make some serious coin and withdraw the winnings.

It ain't gonna happen unless they've hedged your trade, see above statement, $94,800 of very serious coin just vanished at a few strokes of Daniel's keyboard like it never existed!