Leverage and Bitcoin just got married in the cathedral of PC

[2be]

https://www.bloomberg.com/gadfly/ar...ading-clampdown-creates-a-bitcoin-shaped-hole

Would it spell to the end of beginners riding on a high speed motorway usually leading to margin calls and beyond.
Opinions are likely to be divided. On one side one does not give a box of matches to a baby, but where would we be without the matches.
If passed here in the UK (which on balance I hope it will not happen) it will lead to holding of a much larger capital in the trading accounts of the firms providing the trading platforms (rightly called "bucket shops"). Not a great idea, as I keep the amounts in the accounts reasonably low and the whole trading capital is not there for obvious reasons.
If however implemented it will change the industry, will it be for better? I do not know.
I doubt it will eliminate the hopeful, lazy and undisciplined losers from loosing,
they will just die slowly, as the process will get prolonged.

All opinions and views are welcomed.

Good trades to all,

2be

ps: PC stands for Political Correctness

 

[Nowler]

I'm not sure where I stand on this...

At first I was outraged. Why should the rest of us be made walk as slow as our slowest people? Then...I remembered that I turned my levers down from 50/1 to 10/1 and can still generate considerable wins (and losses) of 1% or more...so do I actually care if leverage is capped at whatever the article said (30x or so)?

I like leverage, I think it is useful.
But like electricity which is also useful, in the hands of idiots it can be fatal!

The problem here is not leverage, it's stupidity!
The solution should be one aimed at tackling the problem (stupid people), not tackling everyone...

My cousin was fiend for the gambling! Loved it! a bit too much...
Long story short, he tried to reopen a bookies account online which he has closed for a while in an attempt to curb his gambling but they got him to answer something like 10 questions. They shut his account permanently because he answered yes to the question asking if he had ever hidden losses from friends or family...something like that anyway...

There should be measures put in place to stop the financial devastation that so much people experience. Perhaps a similar questionnaire...?

Actually I have the answer!
Make them graduate to a live account!

If they can show good management of risk and money on a demo/sim over a period of time then they earn the entitlement to move to a live account. This could be further refined by making graduates perform safely on a mini live account either...

Just my 2c as a broke ass retail trader

 

[Nowler]

Just to add to the end of my last post.
Making retail traders go into a practice pool on a brokers platform gives the broker the motivation to train their clients better. If they want to make money from them, then they need to be taught how to trade, at which level they should have the understanding of how to practice good money/risk management.

The practice pool rule might deter the gamblers

 

[brewski1984]

If anything, these rules will benefit the brokers. The same people will still lose the same amount of money but poor old Brewski won't be able to leverage to the max and give the bucket shops a proper beating anymore.

 

[timsk]

Just to add to the end of my last post.
Making retail traders go into a practice pool on a brokers platform gives the broker the motivation to train their clients better. If they want to make money from them, then they need to be taught how to trade, at which level they should have the understanding of how to practice good money/risk management.

The practice pool rule might deter the gamblers

Too funny Nowler!

For the most part, brokers aren't in the least bit interested in educating their customers and making them better traders. They do as much as they do in this regard in order to give the impression that they give a poop - which they don't. It's just marketing, nothing more. The bottom line is that there's only so much money in the pool to be divied up. Sure, it's a big pool, but the ones who do well do so at the expense of the ones that lose. The idea that everyone can do well in this game is pure fantasy and contrary to the basic principles under which it operates. The brokers have little choice but to sell the dream, knowing full well that it will only become reality for a select few. T'was ever the case and forever will be. I'd be extremely surprised if there's any concrete evidence that shows that the educational training material they produce results in their customers making (more) money or, conversely, helps to prevent them from losing (more) money.
Tim.

 

[Nowler]

Too funny Nowler!

For the most part, brokers aren't in the least bit interested in educating their customers and making them better traders. They do as much as they do in this regard in order to give the impression that they give a poop - which they don't. It's just marketing, nothing more. The bottom line is that there's only so much money in the pool to be divied up. Sure, it's a big pool, but the ones who do well do so at the expense of the ones that lose. The idea that everyone can do well in this game is pure fantasy and contrary to the basic principles under which it operates. The brokers have little choice but to sell the dream, knowing full well that it will only become reality for a select few. T'was ever the case and forever will be. I'd be extremely surprised if there's any concrete evidence that shows that the educational training material they produce results in their customers making (more) money or, conversely, helps to prevent them from losing (more) money.
Tim.

I am just looking at this in terms of problem v solution.

Problem: Leverage is plentiful and policy makers deem it to be somewhat reckless.

Correct me if I am wrong, but surely the vast majority of people who are getting burned, particularly by high levers, are the new traders (inside 4 months)? The solution that's being thrown around is to cap leverage for all... but why?

It's no secret that trading is risky...we see the risk warnings all over the place! I saw it hundreds of times already and I am only 7 months in. Again, leverage is not the problem. Stupid people are.

There are loads of solutions to this that doesn't result in all of us losing our choice to leverage up. Of course brokers don't care about training their clients, that's not what I meant. I am saying instead of bringing out a blanket ban on anything over 30 levers (which is decent btw) just make the brokers ensure that a certain level of education has been completed before they are allowed to move to a live account. This doesn't have to be extensive...just ensure they know what leverage is, what risk management is and how to place/manage trades (stops etc)... simple! Then their job is done and it's up to the person to make their choice on to continue or not.

We cannot stupid-proof the world. Stupid people will always finds ways to do stupid things... at least the trading world can say that all the common sense was give to them and they refused to listen.

Then again... I have seen 400/1 leverage offered in some places and to me that is nuts!

I dont know... as long as they dont take the levers I use from me, then I dont mind

 

[timsk]

Hi Nowler,

. . . Correct me if I am wrong, but surely the vast majority of people who are getting burned, particularly by high levers, are the new traders (inside 4 months)? The solution that's being thrown around is to cap leverage for all... but why?

No correction required, you're not wrong.
Here's a driving analogy that encapsulates the way regulators look at the issue. If you have the money, you can get yourself a Bugatti Veyron 16.4 Super Sport, the world's fastest legal road production car with a top speed of 267.856 mph (431.072 km/h). Now, if you drive around at the upper end of this limit then it's only a matter of time before you kill yourself and, quite possibly, someone else. Your argument is that if Lewis Hamilton is behind the wheel - then it's perfectly safe. The regulators view is that the F1 star might live a little longer than if it's you or me driving the car - but even he will kill himself and/or others eventually. It's simply a question of time. Consequently, they cap the speed limit at 70mph for everyone.

. . .There are loads of solutions to this that doesn't result in all of us losing our choice to leverage up. Of course brokers don't care about training their clients, that's not what I meant. I am saying instead of bringing out a blanket ban on anything over 30 levers (which is decent btw) just make the brokers ensure that a certain level of education has been completed before they are allowed to move to a live account. This doesn't have to be extensive...just ensure they know what leverage is, what risk management is and how to place/manage trades (stops etc)... simple! Then their job is done and it's up to the person to make their choice on to continue or not.

They do this to some extent already - their compliance departments demand it. It's just an ar$e covering exercise so your family can't blame them and sue for negligence, lack of duty of care or whatever when you blow up your account - swiftly followed by your brains courtesy of both barrels of a Purdey. Trust me, brokers will only do the minimum demanded of them by regulators and their legal/compliance departments. After all, they're in the business of doing everything they can to encourage retail traders to open accounts and trade - not put obstacles in their way.

. . .We cannot stupid-proof the world. Stupid people will always finds ways to do stupid things... at least the trading world can say that all the common sense was give to them and they refused to listen. . .

. . . And that's pretty much where we are now. I for one don't expect that situation to change very much - if at all - any time soon.
Tim.

 

[Nowler]

I love the driving analogy Imagine! 260+mph!!!!!

Thanks for the explanation mate, it makes sense.
Of course we all know that they are not in the game for morals (nor many of us either).
I wouldn't be against them winding down some of the leverage I see being offered...I guess ultimately I don't really care either way as long as I can use 30-50x

I can see reasons for and against the current offerings... but what's really going to happen is, as you pointed out, the bare minimum.

Poor @brewski ...

 

[shadyee]

I'm not sure where I stand on this...

At first I was outraged. Why should the rest of us be made walk as slow as our slowest people? Then...I remembered that I turned my levers down from 50/1 to 10/1 and can still generate considerable wins (and losses) of 1% or more...so do I actually care if leverage is capped at whatever the article said (30x or so)?

I like leverage, I think it is useful.
But like electricity which is also useful, in the hands of idiots it can be fatal!

The problem here is not leverage, it's stupidity!
The solution should be one aimed at tackling the problem (stupid people), not tackling everyone...

My cousin was fiend for the gambling! Loved it! a bit too much...
Long story short, he tried to reopen a bookies account online which he has closed for a while in an attempt to curb his gambling but they got him to answer something like 10 questions. They shut his account permanently because he answered yes to the question asking if he had ever hidden losses from friends or family...something like that anyway...

There should be measures put in place to stop the financial devastation that so much people experience. Perhaps a similar questionnaire...?

Actually I have the answer!
Make them graduate to a live account!

If they can show good management of risk and money on a demo/sim over a period of time then they earn the entitlement to move to a live account. This could be further refined by making graduates perform safely on a mini live account either...

Just my 2c as a broke ass retail trader

I really do appreciate this reply, anything good can be used wrongly when it's in the wrong hands. Leverage is no different, if not carefully used it might mean huge loses for us, because the higher the leverage the higher the loses if something go wrong.