Negative Balance Protection

This is a discussion on Negative Balance Protection within the Brokerages forums, part of the Commercial category; Ok, thanks. Interesting thread. Originally Posted by hhiusa Why trade a financial instrument class where you negative balance protection? Well, ...

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Old Mar 3, 2016, 7:39pm   #46
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John26 started this thread Ok, thanks. Interesting thread.

Quote:
Originally Posted by hhiusa View Post
Why trade a financial instrument class where you negative balance protection?
Well, I am too surpised... there is a picture of a nice black swan below your post. I think it sums it up.

A couple of reasons why negative balance protection is important imo:
1 - I forget to close a position on an index for instance and market gaps down 5% - Sun shines in the morning, decide to take the day off... hell, the sun keeps shining so I take the week off....
2 - Black swan - Internet connection goes down, phone lines dead/broker not picking up (probably because everyone is trying to get through).
Why would anyone let things end in tears if they can prevent it - My house is mine, I would hate to have to hand it over
It's just an insurance

I think my question got lost...

Cheers.
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Old Mar 3, 2016, 8:26pm   #47
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Originally Posted by Forexmospherian View Post
Morning hhiusa

--------------------------------------------------

First question - Have you read the Investopedia link I had posted on Forex leverage ?

Second point . - my capital account is this particular case is approx $70k of cash - ie that's the proper amount as deposited from myself. Now on leverage of 100:1 - the brokers demands I have at least 1% always there - otherwise a margin call

1% is just $700 so I have $69300 of capital to play with and at a leverage of 100:1 then I can have trades exposing myself to actually $6,930,000

Whether you work out just $210k or even $2.1 million or whatever amount over $70k -= ALL I CAN LOSE IN THE VERY WORSE SCENARIO is my CAPITAL DEPOSIT OF $70K - NOT $210K OR $2.1 MILLION - OR EVEN $6,930,000

That's the main point of Negative Balance Protection

Please tell me you now understand this part ?



Now next point - I have been trading for over 13 years and even before negative balance protection which is relatively new - I was placing scalp trades on at 1 lot or $100,000 even with proper capital as low as $3000 .

On my $70k account - as 3 lot trade is nothing - I could place even a 50 lot trade

My capital is $70k and so exposing myself to a $300k - 3 lots trade is only using leverage of just over 4 and under 5.



You are definitely getting your calculations mixed up - so please read the Investopedia link on the double edge of leverage

I


Regards


F
Hi hhiusa

I doubt whether you would know of this UK phrase - "we are going round the wrekin" with these comments

You will not answer me - and I will not answer and continue to explain more until you agree with the main key point of this thread - ie Negative Balance Protection - and your point why would you bother with it?

You can have a capital account with leverage of just 10:1 - or 100:1 or even 500+:1 - but you dont have to use every time you trade.

So on a $70k account and I take a 3 lot trade rather than say a 7 lot trade - I am only using leverage of approx 4 to 5 - ie 3 lots = $300k - Capital $70k

But if I decide to scalp at say 15 lots - which I can easily do intraday trading with tight stops - I am then exposing myself to £1,500,000 and then my leverage used is approx 21:1. BUT - this is the big BUT - whether I am exposed to is $300K or $1 5 million - I can only ever lose $70k - not $300 or $1.5 million or whatever figure

Can you confirm you understand this and not see why negative balance protection is useful on your account - when using any leverage - what ever amount you choose

Once this is agreed we can this discuss why you have it totally wrong with your assumptions trying to work out my % returns purely of win ratios

Regards

F
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Old Mar 3, 2016, 9:30pm   #48
 
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Quote:
Originally Posted by John26 View Post
Ok, thanks. Interesting thread.



Well, I am too surpised... there is a picture of a nice black swan below your post. I think it sums it up.

A couple of reasons why negative balance protection is important imo:
1 - I forget to close a position on an index for instance and market gaps down 5% - Sun shines in the morning, decide to take the day off... hell, the sun keeps shining so I take the week off....
2 - Black swan - Internet connection goes down, phone lines dead/broker not picking up (probably because everyone is trying to get through).
Why would anyone let things end in tears if they can prevent it - My house is mine, I would hate to have to hand it over
It's just an insurance

I think my question got lost...

Cheers.
You completely missed everything that I was saying. For all those reasons, that is why you should not be trading a product that can result in a negative balance if you want to do things like take the day off or worry about black swans.
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Old Mar 3, 2016, 9:34pm   #49
 
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Originally Posted by Forexmospherian View Post
Hi hhiusa

I doubt whether you would know of this UK phrase - "we are going round the wrekin" with these comments

You will not answer me - and I will not answer and continue to explain more until you agree with the main key point of this thread - ie Negative Balance Protection - and your point why would you bother with it?

You can have a capital account with leverage of just 10:1 - or 100:1 or even 500+:1 - but you dont have to use every time you trade.

So on a $70k account and I take a 3 lot trade rather than say a 7 lot trade - I am only using leverage of approx 4 to 5 - ie 3 lots = $300k - Capital $70k

But if I decide to scalp at say 15 lots - which I can easily do intraday trading with tight stops - I am then exposing myself to £1,500,000 and then my leverage used is approx 21:1. BUT - this is the big BUT - whether I am exposed to is $300K or $1 5 million - I can only ever lose $70k - not $300 or $1.5 million or whatever figure

Can you confirm you understand this and not see why negative balance protection is useful on your account - when using any leverage - what ever amount you choose

Once this is agreed we can this discuss why you have it totally wrong with your assumptions trying to work out my % returns purely of win ratios

Regards

F
I have not failed to answer anything. You have failed to provide correct math and explain your leveraging. Why don't you ask what you want to ask?

You keep beating around the bush. Why don't you look at quests thread he actually provides proof. Between himself and that is what a journal is supposed to look like .
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Old Mar 4, 2016, 12:58pm   #50
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Originally Posted by hhiusa View Post
You completely missed everything that I was saying. For all those reasons, that is why you should not be trading a product that can result in a negative balance if you want to do things like take the day off or worry about black swans.
Me: Dad, I just passed, I need a car now. From a safety point of view, what would you recommend?

Dad: If you’re planning to crash the car, you shouldn’t be driving

Me: I’m not planning to crash it, but accidents do happen
Dad: If you’re planning to crash your car, you shouldn’t be driving

Mum: Ok, dad is not being helpful, if you want a car that has good safety features, I would recommend a car that is not too old, that has seatbelts for a start, good suspensions, that sticks to the road, perhaps front wheel drive (roads get wet here in the uk). I would not recommend a fast car. Perhaps a small size, no more than 4 to 5 years old, that is cheap to maintain. Does this help?

Me: Yes, thanks mum Only asking because the other day, a friend of mine had a black swan cross the road in front of him, he wanted to dodge it but ended up in the ditch, no seat belts in his car, no airbag, he got so hurt

Mum: Not a lot he could have done about that damn swan, but if his parents had advised me on a car, he would probably be okay.
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Old Mar 4, 2016, 3:59pm   #51
 
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Originally Posted by John26 View Post
Me: Dad, I just passed, I need a car now. From a safety point of view, what would you recommend?

Dad: If you’re planning to crash the car, you shouldn’t be driving

Me: I’m not planning to crash it, but accidents do happen
Dad: If you’re planning to crash your car, you shouldn’t be driving

Mum: Ok, dad is not being helpful, if you want a car that has good safety features, I would recommend a car that is not too old, that has seatbelts for a start, good suspensions, that sticks to the road, perhaps front wheel drive (roads get wet here in the uk). I would not recommend a fast car. Perhaps a small size, no more than 4 to 5 years old, that is cheap to maintain. Does this help?

Me: Yes, thanks mum Only asking because the other day, a friend of mine had a black swan cross the road in front of him, he wanted to dodge it but ended up in the ditch, no seat belts in his car, no airbag, he got so hurt

Mum: Not a lot he could have done about that damn swan, but if his parents had advised me on a car, he would probably be okay.
Once again, totally irrelevant. The anaology does not hold. If you drive a car there is always the chance that you might get into a wreck.

If you are invest in the market, you only need negative balance protection against "black swan" events if you trading CFDs and/or leveraging.

That sounds pretty simple to me. Just do not trade CFDs.

Son: But what about Black Swans and negative balance protection?

Dad: You do not have trade CFDs. You could always trade other financial instruments if you are worried about that.

Son: You mean there are exactly other financial instruments? Ones that do not require negative balance protection?

Dad: Yes.
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Old Mar 4, 2016, 4:51pm   #52
 
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or.
Son: But what about Black Swans and negative balance protection?

Dad: You do not have trade CFDs. You could always trade other financial instruments if you are worried about that.

Son: But dad, think about it. If ive got 10k to play with, and only deposit 1K but play the account like its funded with 10k. If SHF for whatever reason and ive got to take a biggun, the max I can lose with this broker is my acc balance, which in this case would be 10% of my capital, much better than 25% - 50% or more.

Dad: Son, all who use leverage are imbeciles and this is the reason why. ----Looong drawn out speech with lots of big words give a degree of credibility to what dads saying although theres more than undercurrent 'son youre a c**t' about it-----

Son: Dad, honestly, i didnt really understand all of what you just said, but it seems like youve got a real opinion on leverage thats preventing you from seeing what is plainly obvious. The way my mate darkie explained it, well, a five year old could understand it. I even understand it.

Dad: Son, darkie shmarkie. The formula for which ive spent many hours based upon unmolested data frooomm,,,,...................blah blah blah..

Son:

Dad: son! wake up!

Son: sorry dad, but when you go off on one like that..... Listen, dad, I think im gona go my own way on this one. I mean youve only been trading a few years right dad

Dad: Fool! Once again, totally irrelevant. If you are invest in the market, you only need negative balance protection against "black swan" events if you trading CFDs and/or leveraging.
You never expose more than 1.5% of your capital stated that you have 10k in an account.
Which do you expose yourself to, all of your account or just 1.5%. If you expose 100% of your account that is 10,000 * 100 (100:1 leverage) = 500,320,000 of buying power * mc²However, you never expose more than once a year and 1.5% of your capital, but sometimes you expose up to 5 times a year in carpark but never near schools son, never near schools
Do the math son. 10k + 1k * x * 0.03 = 500,090,000 * 100 (100:1) = 210,000% of the buying power * buying power (πr²)

Now matter how much double speak you use, this will not change.
Additionally, your words were some sh!t about car wrecks.
5 trading days per week. Your best case scenario is -5.39% in two weeks on 10 pip margins = 1.4076+0.0010. 1.4086/1.4076 = 1.00071. -61-87% 1.00071ˆ61 = 1.0442 and 1.00071ˆ39 = 1.028. 1.0442/1.028 = 1.0539. 5 trading days per week = you being dumbass

That sounds pretty simple to me. Just do not trade CFDs.

Son:
Click the image to open in full size.
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Old Mar 4, 2016, 5:39pm   #53
 
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Quote:
Originally Posted by darktone View Post
or.
Son: But what about Black Swans and negative balance protection?

Dad: You do not have trade CFDs. You could always trade other financial instruments if you are worried about that.

Son: But dad, think about it. If ive got 10k to play with, and only deposit 1K but play the account like its funded with 10k. If SHF for whatever reason and ive got to take a biggun, the max I can lose with this broker is my acc balance, which in this case would be 10% of my capital, much better than 25% - 50% or more.

Dad: Son, all who use leverage are imbeciles and this is the reason why. ----Looong drawn out speech with lots of big words give a degree of credibility to what dads saying although theres more than undercurrent 'son youre a c**t' about it-----

Son: Dad, honestly, i didnt really understand all of what you just said, but it seems like youve got a real opinion on leverage thats preventing you from seeing what is plainly obvious. The way my mate darkie explained it, well, a five year old could understand it. I even understand it.

Dad: Son, darkie shmarkie. The formula for which ive spent many hours based upon unmolested data frooomm,,,,...................blah blah blah..

Son:

Dad: son! wake up!

Son: sorry dad, but when you go off on one like that..... Listen, dad, I think im gona go my own way on this one. I mean youve only been trading a few years right dad

Dad: Fool! Once again, totally irrelevant. If you are invest in the market, you only need negative balance protection against "black swan" events if you trading CFDs and/or leveraging.
You never expose more than 1.5% of your capital stated that you have 10k in an account.
Which do you expose yourself to, all of your account or just 1.5%. If you expose 100% of your account that is 10,000 * 100 (100:1 leverage) = 500,320,000 of buying power * mc²However, you never expose more than once a year and 1.5% of your capital, but sometimes you expose up to 5 times a year in carpark but never near schools son, never near schools
Do the math son. 10k + 1k * x * 0.03 = 500,090,000 * 100 (100:1) = 210,000% of the buying power * buying power (πr²)

Now matter how much double speak you use, this will not change.
Additionally, your words were some sh!t about car wrecks.
5 trading days per week. Your best case scenario is -5.39% in two weeks on 10 pip margins = 1.4076+0.0010. 1.4086/1.4076 = 1.00071. -61-87% 1.00071ˆ61 = 1.0442 and 1.00071ˆ39 = 1.028. 1.0442/1.028 = 1.0539. 5 trading days per week = you being dumbass

That sounds pretty simple to me. Just do not trade CFDs.

Son:
Click the image to open in full size.
That sounds like the reason the bubble burst in first place in 2008.

Bankers: Think about it if we make it look like our customers make and have more money than they actually do, we can allow them to leverage their way into a house. What do we care. We get our money anyway.

Customers: So, you are willing to give me a loan even though I do not make enough for the loan.

Bankers: Yes. This bubble is never going to burst because the government and us say so. You can leverage your finances to buy this house, and in a couple of years the house will have so much equity in it, you can sell and at a profit. You do not need to worry that you cannot afford the payments, much less the interest. We will just add that at the end of the loan, but you will have sold long before that happens.

Customers: Really, you mean I can buy something with money I do not have.
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Old Mar 4, 2016, 5:59pm   #54
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Quote:
Originally Posted by hhiusa View Post
That sounds like the reason the bubble burst in first place in 2008.

Bankers: Think about it if we make it look like our customers make and have more money than they actually do, we can allow them to leverage their way into a house. What do we care. We get our money anyway.

Customers: So, you are willing to give me a loan even though I do not make enough for the loan.

Bankers: Yes. This bubble is never going to burst because the government and us say so. You can leverage your finances to buy this house, and in a couple of years the house will have so much equity in it, you can sell and at a profit. You do not need to worry that you cannot afford the payments, much less the interest. We will just add that at the end of the loan, but you will have sold long before that happens.

Customers: Really, you mean I can buy something with money I do not have.
Then after all this the US Regulators and the Banksters actually pretended to care and want to help their trading customers - by protecting them with reducing their leverage available to trade on the markets

A bit like bolting the stable door after the horse as bolted!

Meanwhile the US Banksters are rubbing their dirty hands together thinking - what a great spin this ie - pretending to protect our customers - by getting them to invest more money with us - we can then rip them off even more next decade

And so it goes on and on

Personally, I think - and its only my opinion Goldman Sachs have caused more financial damage around the whole world than any other organisation -they have been involved in every financial "rip off " I can think of - and to make it worse - they always end up making money out of it !!!
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Old Mar 4, 2016, 6:06pm   #55
 
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Originally Posted by Forexmospherian View Post
Then after all this the US Regulators and the Banksters actually pretended to care and want to help their trading customers - by protecting them with reducing their leverage available to trade on the markets

A bit like bolting the stable door after the horse as bolted!

Meanwhile the US Banksters are rubbing their dirty hands together thinking - what a great spin this ie - pretending to protect our customers - by getting them to invest more money with us - we can then rip them off even more next decade

And so it goes on and on

Personally, I think - and its only my opinion Goldman Sachs have caused more financial damage around the whole world than any other organisation -they have been involved in every financial "rip off " I can think of - and to make it worse - they always end up making money out of it !!!
But that is how you want it, admittedly so. You want to use leverage to buy $1,500,000 worth of something even though you only have $70,000. It is exactly the same as those customers who bought a $1,000,000 house even though they could only afford a $250,000 one. The banks said, "you will make good equity and around 6-13% per year (in my area)". The customers said, "6% on $1,000,000 is certainly a lot more than 6% on $250,000. I'll take the deal, Noel Edmonds!".
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Old Mar 4, 2016, 6:19pm   #56
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Originally Posted by hhiusa View Post
But that is how you want it, admittedly so. You want to use leverage to buy $1,500,000 worth of something even though you only have $70,000. It is exactly the same as those customers who bought a $1,000,000 house even though they could only afford a $250,000 one. The banks said, "you will make good equity and around 6-13% per year (in my area)". The customers said, "6% on $1,000,000 is certainly a lot more than 6% on $250,000. I'll take the deal, Noel Edmonds!".
Actually - you are correct

I want to take advantage of having leverage - but only because I am not a new house buyer - or trading newbie and can use my trading "skills" to make additional gains

I can afford in worse case scenario to lose $70k - although I would not trade that account with massive leverage and try and make 50 - 100% per week gains - but on a small account - such as $500 or $1000 - then knowing I cannot lose say $7k or $!0k if it all goes pear shape - I would take advantage of 400 + :1 leverage and then place say a 1 lot ($100k) stakes on intraday trades - just off capital of $1000 - and then a 100 pip day as doubled my account

I will over weekend explain how you need a lot more than just win ratios and number of trades to work out your project returns - because RR's ratios come into play and not all wins will be the same - but in my case - all losses are within just 3 pips or so of each other - whereas my winning scalps can be from a low as 3 pips to a high as 100+ pips - that's why high win ratios and RR of just 1 to 10 along with multi intraday trades can result is such high returns

Regards


F
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Old Mar 4, 2016, 6:27pm   #57
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No one is right here.

Each trader has their own unique circumstances, reason and motivation for trading.

If a trader has $10k and makes 20%vin a year, it is a big waste of time and he could do better in McD's.
If he employed 10-1 leverage and made $20k now he might get somewhere.

To pontificate about the correct method is a giant waste of time, it is individual for many reasons.
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Old Mar 4, 2016, 6:32pm   #58
 
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Originally Posted by Forexmospherian View Post
Actually - you are correct

I want to take advantage of having leverage - but only because I am not a new house buyer - or trading newbie and can use my trading "skills" to make additional gains

I can afford in worse case scenario to lose $70k - although I would not trade that account with massive leverage and try and make 50 - 100% per week gains - but on a small account - such as $500 or $1000 - then knowing I cannot lose say $7k or $!0k if it all goes pear shape - I would take advantage of 400 + :1 leverage and then place say a 1 lot ($100k) stakes on intraday trades - just off capital of $1000 - and then a 100 pip day as doubled my account

I will over weekend explain how you need a lot more than just win ratios and number of trades to work out your project returns - because RR's ratios come into play and not all wins will be the same - but in my case - all losses are within just 3 pips or so of each other - whereas my winning scalps can be from a low as 3 pips to a high as 100+ pips - that's why high win ratios and RR of just 1 to 10 along with multi intraday trades can result is such high returns

Regards


F
Actually you haven't provided proof of anything. You waffle back-and-forth saying that you only expose 1.5% of your account and then you say you want me expose 3% of your account. Previously you said that you have 10 pip stops now you're telling me that you have three pip stops. You certainly like to brag about your figures but you never show any proof. I would certainly like to see proof that you make 50+ percent a year.

Since you trade so frequently as you say it should be no problem to furnish real proof of 100 trades with a 61-87% win ratio.

CV and The others are right I haven't seen a single real trade on that thread since it started to years ago.

If you don't want to look at my Journal for what proof looks like, then just check @Quest2016's journal.
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Old Mar 4, 2016, 6:41pm   #59
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No one is right here.

Each trader has their own unique circumstances, reason and motivation for trading.

If a trader has $10k and makes 20%vin a year, it is a big waste of time and he could do better in McD's.
If he employed 10-1 leverage and made $20k now he might get somewhere.

To pontificate about the correct method is a giant waste of time, it is individual for many reasons.

Agree - we all have our own unique circumstances

But - think about it - if a part time trader had a spare $10k from somewhere and only made 20% on it in a year - ie $2k - but it only took him say 10 hrs in total to do it - then on hourly rate he would be far better off than in McD's

However if he spent 10 hrs a week and say 450 hrs a year and made $2k - then he might earn more part time - and so would have to count his trading as a hobby that he enjoys rather than really a money making venture.

Trouble is 90% of guys who do invest $10k - are more likely to lose $2k trading and in some cases even lose it all

What is important though is that negative balance protection that is open to all retail traders* at many Brokers - and then a $10k account even suffering a major black swan event can never mean you owe the broker $18 k or even double - whatever leverage you play with

Regards

F

*Depends on size of retail traders capital account with many broker from what I understand
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Old Mar 4, 2016, 6:47pm   #60
 
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No one is right here.

Each trader has their own unique circumstances, reason and motivation for trading.

If a trader has $10k and makes 20%vin a year, it is a big waste of time and he could do better in McD's.
If he employed 10-1 leverage and made $20k now he might get somewhere.

To pontificate about the correct method is a giant waste of time, it is individual for many reasons.
I am not pontificating about the correct method of trading. I am only discussing leverage as it pertains to @Forexmospherian.

If you believe he has proof of any trading activity much less 50% a year, I implore you to show it to me because he will not and I suspect he cannot.
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