CHF mess

[SwingToWin]

i get your point. i agree with you, however these brokers cater to retail clients with some thousand dollars balance at the very best. I don't believe many will take the hassle find a trustworthy lawyer in another country and file a costly lawsuit.

"the problem is when you trade at 50:1 leveraged to your account balance"
my fault, yes. but even if you traded all 6 majors at the same time, you'd get a maximum leverage of 1:10. a little low for forex - normally currencies shouldn't move that much.
or you throw all your funds together and trade stocks, options, futures and fx in one account (like ib). but i find that even riskier than having multiple small and highly leveraged accounts

 

[Sergio77]

In forex you either lose it little by little or all at once but you will lose it all at the end if you stay in long enough because money goes back to central banks and to brokers in the form of commissions paid by suckers. This is good.

 

[SwingToWin]

you're too pessimistic

 

[volpunter]

this is hilarious. I hope you know exactly why this article was put up on that site? Their software application was for years incapable of handling currencies as asset class. I am not sure they can now but they had a very strong motivation to keep people away from currencies.

But yes, I agree with you, due to higher leverage abilities more of those who do not understand how to trade with long-term focus in mind will go bust than in equity markets.

In forex you either lose it little by little or all at once but you will lose it all at the end if you stay in long enough because money goes back to central banks and to brokers in the form of commissions paid by suckers. This is good.

 

[i960]

Personally I think the CME and IB margins on typical forex pairs is just about right.

Shops doing 100-200:1 etc is just too damn much. Sure it attracts a bunch of gamblers and that's what it's designed to do - but there's a point where it gets a bit ridiculous.

Per pair margins seem dead obvious. If FXCM wasn't doing that then that's a major oversight.

How about raising all margins on any pegged pair?

 

[ExperiencedJoe]

How about raising all margins on any pegged pair?

Why ? You make it sound as if the banks are out there to get you.

 

[SwingToWin]

normally pegged pairs are a lot less fluctuating. that's because they are pegged

take hkd/usd as an example, moving in such a tiny range. by raising margin you can't trade that pair properly any more

 

[Johno1]

LOL

Not too good at math are ya?

A 30% adverse movement would wipe out 100% equity - regardless if leverage is 50:1, 20:1, 10:1, 5:1... or anything > 3.33X (lowest leverage).
Then you might be on the hook for any deficit

No one here trades FX on such "reasonable" low leverage (< 3.33X) given FX movements are generally so small (barring yesterday)

The only salient advice is not to have positions too concentrated or correlated & to have stop loss (whether honored is a different matter)

You have hit the nail on the head. You need to be long and short in low/un correllated instruments. That is risk management, not stops that may or may not be effective. Very hard to do for the retail clients with small accounts. Although to achieve this also often requires lots of hard work, nothing comes easy.
Cheers John

 

[Dom]

Ridiculous SNB decision really... More importantly, terrible implementation. They should have announced this at the week-end so market participants would have time to process the information.

First quote after the announcement was around 1.05, few minutes later we were at 0.85. Large IBs/market makers did not even quote prices for hours. Goldman, for example, only started executing trades in the afternoon (LDN time). Arbitrarily decided to execute at 1.03 for all clients. DB, UBS, Citi etc. all suffered large losses. Some HFs closed (Everest main fund), brokers insolvent, prop shops and retail traders blowing up. Nothing left to say really...

Personally I did not trade EURCHF b/c of the price floor. Since I've been EUR short since the first half of 2014 I was lucky. Nobody could have seen this coming though. Not too long ago the SNB reiterated that it would defend the CHF cap. Never trust a CB.

What does it mean for the EUR? Stay short, I'd say. CHF free-float hints at ECB QE on Thursday.

 

[fuzzler]

Great input Dom. I seriously think that SNB o reconsider things and get back to the drawing board.