Why Do Some Retail Traders Hate Sensible Regulations?

[piphog]

Hi all

I'm not talking politically here, but only conceptual.

The problem with liberals is that every time they get an idea because they personally experienced something.They get an idea then want to force that idea on everyone else regardless of what the majority want.

IE - Ah haa I think 10:1 is good, lets force everyone into submission; and if I can't convince them it's better, no big deal. I will align forces with those in power and crush all those that oppose me then we shall have a universal mindset.

Why can't these liberal minded just trade the way they like,on a platform that allows what they want; and leave the rest of us alone. But Nooooo, they have to force you into submission at all costs.

Guess what piphog whether they pass it or not, NO one accepts it or your way of thinking about it. Or perhaps only very few.

Did you know that ?
Can you accept that ? (doubtful)

Hey piphog, did you know that no one agrees or few agree regardless of the outcome did you even stop and think of this ?

Did you know that ?

Rhetorically NO;

Well now it's confirmed that most disagree with you.

Please update this for your records and future reference.

I'm happy to have helped with the updating of your records.

Happy trading

Ive never been called a liberal before by anyone LOL.

The fact is that over-leverage creates issues in OTC trading.

If you want to take excessive leverage, by all means trade the futures that have limited counterparty risk, and with a clearinghouse it is much safer.

You are a retail trader that doesnt understand the institutional environment and the systemic risk that excessive leverage produces. The fact is there are lots of consumers that have been burned by this.

And in response to Pharoah, the analogy of the gas pedal is totally false. 100:1 is not simply the ceiling for these retail brokers, they FORCE you to trade at this level by and large. If you are interested in exploring this more, I would be glad to co-author a paper with you where we can study the practices of retail brokers -- ranging from their advertisements to their leverage policies. Would you be interested, Pharoah?

 

[piphog]

My car's manufacturer "forced" me to accept a car capable of going over 100 MPH (I tested it once in the middle of New Mexico, it really can go that fast - wheeeee!!!!).

Driving that speed is dangerous. Driving that speed all the time under all traffic conditions is suicidal. Guess what? Those guys in Detroit were kind enough to install a gas pedal and a brake pedal. This allows me to go as fast as I like (up to the limits of the design of the vehicle) or as slowly as I feel necessary. I can drive at dangerous speeds and risk both a ticket and an accident if I like. I can drive normal speeds if I like. I can drive really slowly and annoy all the other drivers if I like. My car goes exactly as fast or as slow as I want it to (if you have certain models of Toyota, you may experience some exceptions to the usual rules regarding driver control of vehicle speed - hee hee!).

Most US forex brokers give you an account that has the ability to use 1:100 leverage. Not one of them "forces" anyone to use all that leverage.

Simple risk management (setting SL and lot size to risk a small percent of your account) will naturally keep your leverage under control. If you get lucky enough to catch a big trend and scale into a position, then you can use more and more of that leverage with no real risk to your account.

On the other hand, 10:1 means that you'll need a very large amount of money to be able to open trades or to keep modest trade sizes open without a margin call. It's like getting an automatic speeding ticket if you ever break 10 mph.

If everyone never drove faster than 10 mph, the roads would be a lot safer, but this would not be sensible. Even a regulation that stringent wouldn't keep some idiots from driving off a cliff.

Shoot. I couldn't figure out a way to PM you, so I hope you read this.

As I said in the previous post we could collect data to write a brief paper on the practices of retail FX brokers with respect to their leverage policies, marketing, and any number of other variables. I think such a study would benefit FPA members and any other interested parties and put to rest all the hearsay so we can draw a reliable picture of what is out there. Respond to this post and maybe we can get together on IRC or correspond on Email (or just here) if you are interested.

 

[RahmanSL]

Hmmm, I thought this thread was already buried with the rest of “yestermonths posts”…apparently not quite yet as it is still pretty feisty, in-depth, but all-in-all very educational.

Not meaning to butt into an American issue, doesn’t the right to chose at what leverages one wants in forex trading very much that “freedom of choice” stuff enshrined in the American Constitutions??

I have checked out a number of forex brokers and quite a number of them offers 1:10 leverages apart from up to 1:1000.
So, freedom of choice is already in place….as is the freedom to smoke/drink/gamble or not to!...or to become a priest/cleric/monk or a Forex Trader!

 

[RMSTrader]

My car's manufacturer "forced" me to accept a car capable of going over 100 MPH (I tested it once in the middle of New Mexico, it really can go that fast - wheeeee!!!!).

Driving that speed is dangerous. Driving that speed all the time under all traffic conditions is suicidal. Guess what? Those guys in Detroit were kind enough to install a gas pedal and a brake pedal. This allows me to go as fast as I like (up to the limits of the design of the vehicle) or as slowly as I feel necessary. I can drive at dangerous speeds and risk both a ticket and an accident if I like. I can drive normal speeds if I like. I can drive really slowly and annoy all the other drivers if I like. My car goes exactly as fast or as slow as I want it to (if you have certain models of Toyota, you may experience some exceptions to the usual rules regarding driver control of vehicle speed - hee hee!).


Perfect analogy!

The main opposition I have to this 10:1 proposal, apart from the obvious effect it will have on undercapitalized traders (like myself), is that it smacks of more 'Nanny State' tactics. More gov. control in every aspect of our lives.

God forbid us proletariate down here should ever be allowed access to tools that will empower us to live independent of the worker slave state!

 

[Pharaoh]

I'll stick to my Detroit analogy and await Piphog's research paper "proving" that they "force" anything.

Sure, they encourage you to use more, but that's not the same as forcing anything. Did you ever see a commercial for a sports car set in a residential 25 MPH zone? They usually show those cars hugging the curves out on the countryside with "professional driver, closed course, do not attempt" in fine print on the screen.

Far more than leverage, I see brokers pushing VOLUME. Most don't care if you make 1 huge trade using all available margin or 100 small trades, each with low risk. You can only withdraw those bonuses after so many lots traded, and they want you to trade those lots, in whole or in part. They get their money from the spread (and often cheat a few pips out with slippage on entries and exits).

In terms of risk to a trader, excessive and incautious (wow, my spell check says that really is a word) use of leverate is risky to one's account balance whether one is trading forex or any other leveraged item. If you can make 10 or 100 or 1000) times the amount of a price move, you can lose just as much, just as fast. The only protection is these cases is the margin call policy of the broker.

The best protection for ANY trader in ANY market is education. One must learn not just the reward potential, but have a full understanding of the risk potential of each and every trade. Traders who fully understand risk management won't change their % risk of account balance per trade if the broker offers 500:1 or even 1000000:1 leverage. Traders who don't understand risk will manage to get wiped out even at 1:1. It will just take a little longer.

Just like in a car, learn to recognize market conditions and your own trading rules. Your risk management controls your actual use of leverage for any one trade, just like the gas and brake pedals control the speed of the car. Unlike your car, in forex, you can control multiple vehicles (trades) using sloplosses and add to winning positions when you spot that perfect trend. Then you can put more and more of that leverage to good use while not risking a cent of your account balance. You won't be able to do this very often, but it would be a shame to not have the ability to do it when conditions are right.

 

[Agent86]

I like it

Hmmm, I thought this thread was already buried with the rest of “yestermonths posts”…apparently not quite yet as it is still pretty feisty, in-depth, but all-in-all very educational.

Not meaning to butt into an American issue, doesn’t the right to chose at what leverages one wants in forex trading very much that “freedom of choice” stuff enshrined in the American Constitutions??

I have checked out a number of forex brokers and quite a number of them offers 1:10 leverages apart from up to 1:1000.
So, freedom of choice is already in place….as is the freedom to smoke/drink/gamble or not to!...or to become a priest/cleric/monk or a Forex Trader!

Yep, Yep and double Yep

I like it and your are right

In addition as I brilliantly pointed out previously that I know what to do with my money more then the so called protectors who claim they want to regulate you in order to protect you.

Once again I know whats best for me, and I wish these people would just go live their lives and leave people alone.

I get no response from any of these topics as you can see I've called out for justification many times and it became ever more silent when talking about who should be able to make the decisions with my money ?

If these people really want to protect me then why don't they let me invest in their managed fund with a guarantee of profit ? That would be about as much protection as you could ever get.

And since they are not pushing for that, I suspect they have other reasons that benefit them and not to protect anyone at all except their own interests and this is every apparent as well.

It's all been said and posted and we all never get a reasonable response from these so called protectors and typically ends in name calling since they end up frustrated in not being able to express their points, and force the issue anyhow regardless of what people want.
We in the US are currently seeing this with our politicians which is becoming problematic to freedom.

Happy posting and thanks for your most insightful and brilliant post


P.S
Pharaoh's continuous brilliant posts / or I should say unanswered posts have also been ignored by the so called protectors. Just FYI it needed mentioning

 

[piphog]

I'll stick to my Detroit analogy and await Piphog's research paper "proving" that they "force" anything.

Sure, they encourage you to use more, but that's not the same as forcing anything. Did you ever see a commercial for a sports car set in a residential 25 MPH zone? They usually show those cars hugging the curves out on the countryside with "professional driver, closed course, do not attempt" in fine print on the screen.

Far more than leverage, I see brokers pushing VOLUME. Most don't care if you make 1 huge trade using all available margin or 100 small trades, each with low risk. You can only withdraw those bonuses after so many lots traded, and they want you to trade those lots, in whole or in part. They get their money from the spread (and often cheat a few pips out with slippage on entries and exits).

In terms of risk to a trader, excessive and incautious (wow, my spell check says that really is a word) use of leverate is risky to one's account balance whether one is trading forex or any other leveraged item. If you can make 10 or 100 or 1000) times the amount of a price move, you can lose just as much, just as fast. The only protection is these cases is the margin call policy of the broker.

The best protection for ANY trader in ANY market is education. One must learn not just the reward potential, but have a full understanding of the risk potential of each and every trade. Traders who fully understand risk management won't change their % risk of account balance per trade if the broker offers 500:1 or even 1000000:1 leverage. Traders who don't understand risk will manage to get wiped out even at 1:1. It will just take a little longer.

Just like in a car, learn to recognize market conditions and your own trading rules. Your risk management controls your actual use of leverage for any one trade, just like the gas and brake pedals control the speed of the car. Unlike your car, in forex, you can control multiple vehicles (trades) using sloplosses and add to winning positions when you spot that perfect trend. Then you can put more and more of that leverage to good use while not risking a cent of your account balance. You won't be able to do this very often, but it would be a shame to not have the ability to do it when conditions are right.

Well if you re-read my original, I was asking you if you wanted to co-author the paper with me, since we are on either side of the issue. I have already taken a sample of 10 and not surprisingly i've found that all of them force a minimum of 100:1 leverage in trading, no surprise there. but I want to gather a larger dataset and perform proper econometric analysis on them, with a number of variables accounted for.

A comment regarding your point on volume vs. leverage -- what do you think high leverage induces? It creates trades that go bad more quickly, and entices more trading to occur.

Pharoah, if you would like to co-author this with, please email me at piphog@hush.com -- apparently you ignored my request, but I would like you to do it with me so we can share the data and people don't write off my results. Thank you.

 

[piphog]

Yep, Yep and double Yep

I like it and your are right

In addition as I brilliantly pointed out previously that I know what to do with my money more then the so called protectors who claim they want to regulate you in order to protect you.

Once again I know whats best for me, and I wish these people would just go live their lives and leave people alone.

I get no response from any of these topics as you can see I've called out for justification many times and it became ever more silent when talking about who should be able to make the decisions with my money ?

If these people really want to protect me then why don't they let me invest in their managed fund with a guarantee of profit ? That would be about as much protection as you could ever get.

And since they are not pushing for that, I suspect they have other reasons that benefit them and not to protect anyone at all except their own interests and this is every apparent as well.

It's all been said and posted and we all never get a reasonable response from these so called protectors and typically ends in name calling since they end up frustrated in not being able to express their points, and force the issue anyhow regardless of what people want.
We in the US are currently seeing this with our politicians which is becoming problematic to freedom.

Happy posting and thanks for your most insightful and brilliant post


P.S
Pharaoh's continuous brilliant posts / or I should say unanswered posts have also been ignored by the so called protectors. Just FYI it needed mentioning

I wasn't ignoring him at all. He's being repetitive, so there's no need to address what has already been addressed.

The fact is my preliminary dataset shows that brokers simply don't offer downside leverage flexibility, they are forcing a minimum of 100:1, so the whole car analogy really is rather pointless, that's my whole point here.

 

[Pharaoh]

I read your offer of a paper. Until you can prove to me that there's a single NFA/CFTC/SEC regulated broker out there "forcing" people to use 100:1, I'd rather not waste my time. Show me a single instance of a legit (or semi-legit) USA broker "forcing" 100:1.

The only thing I can think of that could come close to this would be a broker allowing people to open an account with a very tiny amount of money and having a minimum trade size that would need to use most of the leverage to open a single trade. Most brokers with very low minimum opening balances allow microlots and nanolots.

I'm sure there are plenty of US and non-US brokers that encourage people to go crazy with leverage. Yes, bonuses encourage volume, but once again, that's not "forcing" anything. Encouraging isn't the same as forcing.

I await your proof. You claim to have 10 examples, so sharing 1 shouldn't be too hard.

 

[Singlemalt]

Cutting to the chase

I have been reading with interest piphog's opinions, and watching the responses. I am, in Forex, a newbie, but it doesn't take a newbie to see what is the issue. We seem to have someone who is worried about his fellow traders and thinks the Government should protect us. Hmm. My opinion is: I am now a big kid, I'm potty-trained, I wear big-guy clothes. If I go into Forex and blow ALL my funds, It's MY F---ing business, not the governments! Or any other bleeding heart. What I would have government do is LEAVE ME ALONE!
To the best of my knowledge there has never been a successful Government program designed to help anyone! What I have to do is admit I screwed up, do a proper analysis get some more money and try again, but for Christs sake don't go whining to somebody else to bail me out!
Singlemalt