Leverage : forex , what's the big deal.

[wisestguy]

a lot of people seem to suggest that $ for $ you can make more on forex than you can on equites .

I don't see how this is so .

the range on E/$ for last 3 months has been around E0.10 , which is 100 tics .

if for US100, 000 trade lot , you are margined at 10 K , then your profit ,assuming you won , would be around the $15-17k range over 3 months , starting with a E/$ quote of 8100 .

so that would be a 170 % RORC for 3 months . good but not exactly stellar .

if I traded the DAX , I could do 1 contract for margin E10k , if I netted 150 points on average per month for 3 months , I make ( E50 x 450 ) E22,500 , which is way more than US17k .

so the returns are better for equities than forex , though of course in forex , the trend is more obvious.

comments please ?

 

[JTrader]

wisestguy -
if for US100, 000 trade lot , you are margined at 10 K , then your profit ,assuming you won , would be around the $15-17k range over 3 months , starting with a E/$ quote of 8100 .

Most retail spot forex brokers offer margin of 1%.

Cheers

jtrader.

 

[henry766]

i'd question $100,000 on $10,000 margin , seems very low to me , but i suggest 170% in 3 months is ok.

 

[wisestguy]

Most retail spot forex brokers offer margin of 1%.

Cheers

jtrader.

such as ?

if that's true then I don't mind doing forex

 

[hindsight]

such as ?

if that's true then I don't mind doing forex

I know from speaking to them today http://www.gftforex.com offer 1%, min deposit is $2500.

 

[s-a]

the range on E/$ for last 3 months has been around E0.10 , which is 100 tics .

This 10 cents which equals 1000 pips which from top to bottom of the range would represent $10,000 on a single full size contract. That same full-size contract would only tie up $1000 typcially. You just can't get that sort of opportunity in equities IMHO. Of course leverage like this is a double edged sword so good money mangement is essential. I also feel that currencies are easier then equities because they trend for so darn long.

Margins typically seem to be in the 1-5% area depending on which broker you are using. There are many many to choose from. Lots are not honest though so be wary and know what you are getting into.

HG

 

[wisestguy]

This 10 cents which equals 1000 pips which from top to bottom of the range would represent $10,000 on a single full size contract. That same full-size contract would only tie up $1000 typcially. You just can't get that sort of opportunity in equities IMHO. Of course leverage like this is a double edged sword so good money mangement is essential. I also feel that currencies are easier then equities because they trend for so darn long.

Margins typically seem to be in the 1-5% area depending on which broker you are using. There are many many to choose from. Lots are not honest though so be wary and know what you are getting into.

HG

my mistake , should be 1000 tics , but the profit is still correct , significantly more than $10k.

I'm surprised they give so much leverage , but hey I'm not complaining unless it's crappy exchange traded forex then I do have a problem with that .

but yes the trend is big .

 

[JTrader]

Hi wisestguy

1% leverage from retail spot forex brokers appears to be the norm. Some retail spot forex brokers even offer 400/1 leverage. I think that 1% leverage is more than enough. I would not want to trade with 0.25% leverage - not because i think it would get me into trouble, but i suppose the chances of things spiralling out of control are that much greater for an undisciplined trader.

I think that when choosing a retail spot forex broker, it is essential to choose one who GUARANTEES negative equity protection, i.e. they GUARANTEE that your account balance will not become negative - regardless of whatever happens in the market, thus you will never owe them more money than you have deposited. AC Markets, RJOFX and Oanda - do make this guarantee. Others will surely do too.

Cheers

jtrader.

 

[TheBramble]

I think that when choosing a retail spot forex broker, it is essential to choose one who GUARANTEES negative equity protection, i.e. they GUARANTEE that your account balance will not become negative - regardless of whatever happens in the market, thus you will never owe them more money than you have deposited. AC Markets, RJOFX and Oanda - do make this guarantee. Others will surely do too.

JT - Are you sure they guarantee this under all market conditions?

 

[JTrader]

TheBramble - JT - Are you sure they guarantee this under all market conditions?

HI

yes I presume so (but am not 100% certain, as they may have some small-print somewhere - so it's probably best to meticulously check the policy of individual firms) - afterall, the possibility of the market collapsing and the client being left with a big bill to pay, is surely the reason why they have added this enticement.

For me, this facility is a very valuable one, and may certainly ease some pressure, and perhaps may help (especially) swing traders to sleep more easily :!:

Here are the responses that i received from RJOFX - they seem pretty clear.

RJOFX is based out of Chicago
Your FX account will be a zero debit account. Your positions will be liquidated when you hit 1/4 of your 1% margin.
RJOFX does not charge wire fees on outgoing wires. The only fee that will apply is if your bank charges wiring fees for incoming wires.

The client acknowledges in the account agreement that they may be liquidated if they drop below the margin requirement. We do guarantee that client accounts will not go debit regardless of market conditions. We also have a more lenient policy than most of our competitors because we do not liquidate clients the second they are on margin call. We wait until the clients equity drops to 25% of the actual margin requirement before effecting auto-liquidation.

Clients can however go deficit if they have subscriptions for different pay services if they owe for a service and the market liquidation causes their account to have a $0.00 balance, they could go debit upon withdrawal of the fee for additional services. We will be offering multiple advisory services in the future that will be fee based, these are the types of services I am referring to.

Cheers

jtrader.

 

[TheBramble]

RJOFX small print

"Disclaimer: *Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all or more of your investment therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Zero slippage on orders* (on trades up to 20 million currency units. No slippage during normal global exchange trading market hours Sunday 5:00 pm ET until Friday 5:00 pm ET, with the exception of periods of extreme market volatility). " {my emphasis}

I'm not knocking RJOFX (or any brokers - they have a right to protect themselves), but as a client, you need to be aware of just how far their 'guarantee' goes.

 

[JTrader]

RJOFX Representative -
We do guarantee that client accounts will not go debit regardless of market conditions.

Thanks TheBramble

so with the RJOFX disclaimer in mind, what can the above quote be other than complete b***s**t? is it valid in any sense? willl get back to RJOFX.............

Cheers

jtrader.

 

[s-a]

When FX brokers first started using that * I was very annoyed. Sounds as silly to use the word "guarantee" accompanied with a star as it does to say "zero commission". I hate marketing.

HG

 

[JTrader]

Guaranteeing that a clients account balance cannot fall below zero - spot and futures

Hi

IHave asked the RJOFX representative to exactly state the RJOFX policy on whether a clients account balance cannot fall below zero.........

Let's still presume that some retail spot forex brokers do make this guarantee. Are any futures brokers likely to be able to offer such a facility/make such a guarantee in the future? if not, why is it that some retail spot forex brokers are able to offer such a guarantee, but futures brokers are not? what is the major difference?

Cheers

jtrader.

 

[JTrader]

AC Markets guaranteeing that a clients account balance cannot fall below zero

http://www.ac-markets.com/EN/about_us.advantages_trading.asp -
No negative balances - limited risk. With ACM your risk is only limited to funds or deposit. Our unique, automatic margin liquidation policy eliminates concerns about debit balances by guaranteeing that you will never owe more than you have in your account.

AC Markets disclaimer says.........

http://www.ac-markets.com/EN/dealing_room.risk_disclaimer.asp -
Trading foreign exchange may result in substantial loss of funds and/or complete loss of funds and therefore should only be undertaken with risk capital. The definition of risk capital is funds that are not necessary to the survival or well being of the user. ACM SA strongly recommends that a user considering trading foreign exchange products read through all the main topics contained in the ACM SA website so that he/she may obtain a clear and accurate understanding of the risks inherent to fx trading.

..............It mentions "substantial loss of funds and/or complete loss of funds", but not complete loos of funds, and then some.................

Cheers

jtrader.

 

[JTrader]

Guaranteeing that a clients account balance cannot fall below zero

Hi

as an intraday trader who doesn't hold open positions overnight, whether or not the retail spot forex broker guarantees that a clients account balance cannot fall below zero, is important to me - for peace of mind etc. But, I will always be close at hand and able to see what the market is doing, and therefore feel that this facility is not as important to me as it would be to a swing trader, or a trader who is not monitoring their positions closely, and who will hold overnight positions etc.

Nevertheless, my concerns are -

1. If the market collapses due to a major economic news or global event, I want to know that if I cannot close my positions (due to the banks within the interbank market removing their quotes/liquidity),

or

2. if I cannot close my positions without MAJOR slippage, I will at worst have wiped out my account balance - but I will not owe the broker any more funds - due to a negative account balance.

3. Or if I cannot exit a position due to a fault with my brokers software, the connection to it, or the inability to get through to their trading desk - I want to know that they will not be happy to have seen my account balance reduced to zero, without displaying the cheek to ask me for more funds in order to cover additional losses below zero .

Cheers

jtrader.

 

[JTrader]

The price you click on is the price you get filled at.........

Many retail spot forex brokers state in their advertisements that the price you click on is the price you get filled at. However, during periods of extreme volatility slippage is possible and you may not get filled at the price you clicked on. In this case I would expect the broker to offer you a re-quoted price (this is only fair), but it seems that some brokers may fill your trade at a new price without, offering a requoted price that the client has to confirm.........Which brokers (if any) fill customers at a new price, without offering the client a choice as to whether they accept it or not?

Many thanks

jtrader.

 

[al-motor]

Jtrader-

U mention ACM- someone told me about them and i am currently looking at them- BUT they seem to operate from Swiss- I have heard negative stuff about some Swiss firms- what do u know about them ??

thanks
Al

 

[wisestguy]

like someone said - low margins work both ways . you have to get the trend before yours run out o/w you will have to top up til you can or you lose.

 

[s-a]

Many retail spot forex brokers state in their advertisements that the price you click on is the price you get filled at. However, during periods of extreme volatility slippage is possible and you may not get filled at the price you clicked on. In this case I would expect the broker to offer you a re-quoted price (this is only fair), but it seems that some brokers may fill your trade at a new price without, offering a requoted price that the client has to confirm.........Which brokers (if any) fill customers at a new price, without offering the client a choice as to whether they accept it or not?

Many thanks

jtrader.

Just when the new wording on "gaurantee" was changed I traded lightly just prior to an NFP report. I had a stop entry order 40 pips away from market before the report. After I was filled, I got 30 pips of slippage. This was with TradeStation FX which uses RJO FX.

HG