Would Forex Brokers restrict traders who win 100% or 300% a year?

[GRULSTMRNN]

What are you talking about? You lack basic knowledge of currency markets. Cash fx is the basic asset from which all your named derivatives are priced off. The largest asset class in the world is cash fx. That is where all the supply and demand is. Most multinational corporates deal in fx and have fx exposure. True, not all trade cash fx outright but setup derivatives to hedge against fx exposure, but the derivatives are the ones that are priced as function of moves in cash fx, not the other way around. Hedging fx derivatives does not drive the price of cash fx, it is the exact other way around. Don't believe some blokes who hang behind the squawk box all day and try to tell you that they know where cash fx is heading towards just because there are a few large option expires at level x or y at any given day. That is complete nonsense and works out much less often than it fails.

Also your point on a majority of people trading fx to reduce exposure is total nonsense. The fx market is an exchange of risk in a closed circuit, meaning the exact same amout of notional that is traded to reduce exposure is traded to take on exposure.

Lastly, you might be right on the spread in some very exotic pairs. But otherwise the spreads in cash fx are tighter than any other asset class given we compare equally liquid pairs with another asset in another asset class and compare matching notional exposure. Show me any equity index future that trades at a tighter spread than eurusd, for example 10 million usd equivalent base notional. Am happy to show you the spread I can trade at during market hours that beats the spread of any future you throw my way.

The real problem with cash FX is that there is not much ability to cross hedge and the spreads are wide. I remember wanting to daytrade the exotics and the spreads were just so prohibitive that I was forced into trading the majors.

The problem I have with the whole thing is that the market is too one sided. The banks control almost every instrument that can affect the majors. Examples:

FX Options and Swaps as well as Forwards and rate arbitrage. Eurodollars, STRIPS, and Short term fixed income instruments have HUGE currency risk in them!

Remember, most of the activity in FX is because people are trying to REDUCE their exposure!

This means that anybody caught on the wrong side of the latest news is probably not going to have a chance in the near term to wait it out, and take a smaller loss.

The point is, the FX brokers and market gurus claim that buying and selling in the FX markets is moving the price but in fact it is not true. VERY FEW groups are simply taking FX risk outright.

The proof is in the spreads. If there was actually genuine price discovery that was a function of buying and selling then the spreads would be much more narrow.

In my opinion you should trade ASX, NK225, Eurostoxx, FTSE, or U.S. equity index. Cross hedge is VERY useful!

 

[GRULSTMRNN]

Spx500 does not generate 8% annually (on average) over a long period of time already. But you make an otherwise very valid point.

300% a year, Did you read a journal here just a while ago that he posted gaining more than 300% profit within about two months, there was nothing wrong with his broker at all; why would a broker restrict your trades? as long as they can make money on commission fee.
By the way, if the strategy is making 300% profit a year with 300X leverage, essentially it is only making 1% profit over a year without leverage and that is not a good one. Even passive SP 500 index can average 8% annually without any leverage and without any effort.

 

[GRULSTMRNN]

Are you Chinese? Where do you derive your outlandish and totally unrealistic expectations from? I promise you that you will get killed with almost 100% certainty with such leverage levels. I doubt you understand the underlying statistics so no point to elaborate on this. Just saying, unless you want to lose your entire investment you should learn some of the most fundamental basics of this business.

Actually i am new here, I would like to read that link if you have it. but is not 300% in two months is too risky?

I actually have no idea what is the passive SP 500 index. and when you say it averages 8% without any leverage so can I have a leverage and invest in it? to increase this 8% to 80% for example?

otherwise, still the 300% profit is better than 8%!

 

[Real Money]

Cash fx is the basic asset from which all your named derivatives are priced off.

Actually, sovereign debt is a cash equivalent. There is more debt than their is currency. Much more. The bonds are not derivative they are the fundamental asset.

When I said the spreads are wide it is because the RETAIL FX shop is MARKING UP THE SPREADS!

I'm not mistaken here.

 

[GRULSTMRNN]

Yes you are hugely mistaken. Cash fx and bonds are entirely different asset classes. Debate that as much as you like, you are wrong on this. And if you pay wide spreads on liquid fx pairs then you trade with a shit broker, not the fault of cash fx.

Back to your claim, which index future has tighter spreads in, let's say 10mil usd notional, than Usdjpy or eurusd? Please show us. You made the claim.

Actually, sovereign debt is a cash equivalent. There is more debt than their is currency. Much more. The bonds are not derivative they are the fundamental asset.

When I said the spreads are wide it is because the RETAIL FX shop is MARKING UP THE SPREADS!

I'm not mistaken here.

 

[Real Money]

Back to your claim, which index future has tighter spreads

Listen, I am not trying to argue with you about which instrument is more liquid. I said that
"there is not much ability to cross hedge" in cash fx and I assumed that FX trader is probably trading with marked up spreads because he is getting 300:1 from the aussie broker (and he only has 50k USD). I may be wrong about that too.

I never said that inter-bank spreads are not liquid (I know for a fact they are). The banks have state-of-the-art technology, and the quotes are nearly perfectly efficient.

you argue that interest differentials drive currency trends and I agree

Additionally, this statement by you confirms what I said about the bond market being the primary driver of FX flows.

 

[GRULSTMRNN]

This is what you stated. And you are simply wrong. With the right brokers cash fx spreads are extremely tight in most liquid pairs, a lot tighter than futures spreads. And retail has access to those tight cash fx spreads. In fact retail has access to much tighter spreads vs larger players or banks because retail on average does not trade 50 or 100million notional orders.

The solution to tighter fx spreads is not trading equity index futures (unless there is an unrelated other rational in doing so) but a better broker choice. Retail brokers that pass through bank spreads and don't mark them up are actually aligned with retail interest, they have an incentive to let clients profit largely and the more clients trade the more the broker earns in commission. Liquidity providers widen spreads or don't quote if it does not suit their interest. Hence retail brokers who pass through cash fx spreads have an incentive to let clients make money, the more the better.

The proof is in the spreads. If there was actually genuine price discovery that was a function of buying and selling then the spreads would be much more narrow.

In my opinion you should trade ASX, NK225, Eurostoxx, FTSE, orU.S. equity index. Cross hedge is VERY useful!

 

[qlai]

Many brokers even big names such as FXCM or others claimed to be not taking the opposite side but for example FXCM was banned from the US because their liquidity provider was actually another company that was just created by FXCM to take the opposite side of the traders and they make money everytime a trader lost their money.

I am sure this idea is not only with FXCM but it happens with the many other brokers. that is why I thought they would restrict the winning trader account

@GRULSTMRNN, I am of the same opinion. Do you think it has merit? Maybe once you get so big that you become to matter, you can establish a more personal relationship with the broker and they simply know not to take the other side of your trades? But I am pretty sure that if they determine that your flow is toxic, they will make sure to shut you down.

 

[bbpp]

If you do arbitrage or your trade in and out too fast,( like in 1 minute), you will be banned by most forex brokers.They do not bet against you but they need enough time to hedge . Otherwise no problem with them no matter you win 10 times or 100 times in a month or two.
I saw lot of traders made 10 times, 20 times in a few month without problem withdrawing their profit from brokers.

FXCM case does not prove every broker does the same thing. Just like when you see a policeman do robbery does not prove every policeman does robbery.
If brokers all don't allow traders to make big money, who the hell need them? They will lost all customers and go broke fast. On forex forum, every small issue on the brokers side has been posted and traders all watch how brokers solve it. If they can't solve it fair and soon, there will be huge amount of their customers leaving them.I see a trader has big accounts with several offshore forex brokers, and whenever an issue with one of his brokers was posted, he go to chat and threaten to withdraw his fund if the broker can't solve the issue.

I see OP is new to trading and has many misunderstanding about trading.
Like S&P average 8% annual growth, he wants to leverage 10 times to make 80%. This will blow his account fast ,since 8% is an average growth. There are many times the index is down like 10% or 20%, then his leverage account will blow up many times.

 

[GRULSTMRNN]

No, I believe those are conspiracy theories. There are decent brokers and there are bad (=bucket) brokers. The list of reputable cash fx brokers is very thin but they exist. Search past posts, most of them are named on this site.

@GRULSTMRNN, I am of the same opinion. Do you think it has merit? Maybe once you get so big that you become to matter, you can establish a more personal relationship with the broker and they simply know not to take the other side of your trades? But I am pretty sure that if they determine that your flow is toxic, they will make sure to shut you down.