Comments on: CFTC Proposing 10:1 Leverage Requirement – Here is what you can do http://www.tradingheroes.com/cftc-proposing-10-to-1-leverage-requirement-here-is-what-you-can-do Forex Trading Blog Fri, 16 Jul 2010 06:00:43 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Hugh http://www.tradingheroes.com/cftc-proposing-10-to-1-leverage-requirement-here-is-what-you-can-do/comment-page-1#comment-2338 Hugh Fri, 22 Jan 2010 10:15:15 +0000 http://www.tradingheroes.com/?p=1850#comment-2338 I appreciate the comment and you are right, I have heard of fund managers who only go up to 3:1 and some of them even favor 1:1. However, I would keep in mind that they are trading large sums of money. For the independent trader, it is more advantageous to have less capital going towards margin. You are also right about understanding the risk, but taking into account the leverage should be part of the equation. I'm sure that 90% of 1:1 traders in the stock market lose their entire accounts also. They don't understand the risk and they don't exercise proper money management. Like I mention above: "What traders should really be looking at is how much they can afford to lose. Let’s say a trader with good money management has a risk tolerance on any trade of 2% of total equity. Therefore, in a $1,000 micro account (trading 1,000 unit lots) the most they could afford to lose on one trade is $20. At $0.10/pip, that is 200 pips. That is the same if the margin requirement is 400:1 or 10:1, correct?" With more aggressive strategies, the higher leverage is necessary. Just because one group of people feel that this is too much leverage, doesn't mean that everyone else should be forced to abide by those rules. Everyone trades differently. I know people who have made a living for years trading more aggressive strategies with high leverage. All I am saying is that we should have the freedom to choose. Is that fair? Thanks for reading and commenting, I'm sure there are many people who share your opinion and I respect your willingness to express it. I appreciate the comment and you are right, I have heard of fund managers who only go up to 3:1 and some of them even favor 1:1. However, I would keep in mind that they are trading large sums of money. For the independent trader, it is more advantageous to have less capital going towards margin.

You are also right about understanding the risk, but taking into account the leverage should be part of the equation. I’m sure that 90% of 1:1 traders in the stock market lose their entire accounts also. They don’t understand the risk and they don’t exercise proper money management.

Like I mention above:
“What traders should really be looking at is how much they can afford to lose. Let’s say a trader with good money management has a risk tolerance on any trade of 2% of total equity. Therefore, in a $1,000 micro account (trading 1,000 unit lots) the most they could afford to lose on one trade is $20. At $0.10/pip, that is 200 pips. That is the same if the margin requirement is 400:1 or 10:1, correct?”

With more aggressive strategies, the higher leverage is necessary. Just because one group of people feel that this is too much leverage, doesn’t mean that everyone else should be forced to abide by those rules. Everyone trades differently. I know people who have made a living for years trading more aggressive strategies with high leverage.

All I am saying is that we should have the freedom to choose. Is that fair?

Thanks for reading and commenting, I’m sure there are many people who share your opinion and I respect your willingness to express it.

]]> By: N http://www.tradingheroes.com/cftc-proposing-10-to-1-leverage-requirement-here-is-what-you-can-do/comment-page-1#comment-2337 N Fri, 22 Jan 2010 10:01:10 +0000 http://www.tradingheroes.com/?p=1850#comment-2337 If you know anything about trading, and more so about risk how the bit funds do this, they do not leverage more then 1:3 up to 3:1, You have to ask yourself why up to 90% of traders loose their account in such a short space of time and its leverage and just a lack of understanding of it. 10:1 is still more then high enough. You do have to look at the bigger picture use of leverage usuaully higher with small accounts, exactly the people the CTA is trying to protect. And the funny thing is they dont even know it. The only group that benifit from a use of high leverage is the broker as they know your account wont be around for long, they can even act as the counterparty knowing that!!!. Best regards N If you know anything about trading, and more so about risk how the bit funds do this, they do not leverage more then 1:3 up to 3:1,

You have to ask yourself why up to 90% of traders loose their account in such a short space of time and its leverage and just a lack of understanding of it.

10:1 is still more then high enough.

You do have to look at the bigger picture

use of leverage usuaully higher with small accounts, exactly the people the CTA is trying to protect.

And the funny thing is they dont even know it.

The only group that benifit from a use of high leverage is the broker as they know your account wont be around for long, they can even act as the counterparty knowing that!!!.

Best regards

N

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