What would be the point of actually using these ultra low margins, rather than having a well funded trading account?
Can anyone realistically expect to trade with any level of sustainable success, a 6E contract currently worth $161k (125k euros x 1.2892) using $500 as margin, at 322:1 leverage? This is rhetorical, as I'm sure TMFT knows this, I'm just curious to hear why he considers it worth mentioning as a benefit to futures vs fx, from a practical standpoint.
The original question was, "In the light of PFG why trade EUR/USD instead of 6E... since with 6E at least you had some protection and regardless of the % of your money you got back... you were still ahead of the retail forex traders.
The reply I got was...Forex is an entirely different animal.
To which I replied ... comparing 6E charts side by side with EUR/USD charts ... they were almost identical, a pip and a tick per both worth $12.50 and the only difference I could see was the difference in margin.
I was asked what I meant by margin ... so I explained the difference in margin ...
and here we are....
I do have a couple of questions for you though....
1. How do I get my broker to raise my margin requirements? I told him you said if he raised them I would make more money trading. He said if he raised them for me .... he would have to raise them for everyone ... so he wouldn't do it.... he said I would just have to learn to deal with low margin requirements.
2. Do I have to give back all the money I made trading with low margin requirements?
I'm just a simple man trading a simple plan.
My daddy always said, "Every day above ground is a good day!"
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I bet you didn't really use $500 margin/322:1 leverage to make all that money, and likely had closer to at least the 5-6x higher requirements that FX requires, so that the margin comparison as a benefit to futures is pointless, was my point.
You have a very good point! Over leverage is not in the benefit of the trader.
This allows traders to add money when they lose in the hopes of "averaging"...
It allows them to trade many lots in hopes to grab just a few ticks...
but here is the worst part: having a fixed based amount which is so low does not even notify traders that the exchange raised or lowered margins. This could signal volatility changes, trend changes, etc and is done by the exchange in the benefit of the trader. Having something that is % based could a lot more beneficial.
Professionals (CTAs,Hedge Funds, Prop Firms..) know that leverage is the Achilles Heel of every trader and that spontaneous reaction to score big that turns into a loss many times. Their risk parameters are so strict that I have seen them trade 1 lot on 40-50K of capital and more at times.
The competition between brokers has become so ridiculous that it's simply painful to see the idea put into a small investor that he could trade like that.
@Futures Operator just to further your example: minimum account $2,500 would be allowed to trade 5 lots of 6E
which is about $800,000. I want to see the success rate of that.
Having said all that...it's the right of every trader to believe/practice/exercise/trade what he thinks is best for him.
PM with any questions about optimusfutures (800) 771-6748 (561) 367 8686. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING.
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In yesterday's hearing on Drohan Lee LLP's motion on behalf of PFG's retail forex customers Judge Carol Doyle advised the plaintiffs to file an "adversary" suit against the Trustee to force him to return the funds of PFG's forex customers.
A victory for Drohan Lee would indeed be a huge precedent for all retail forex traders in the United States, and a welcome one at that. However, the precedent may not be to the liking of many in the futures industry. This quote from John Roe of the Commodity Customer Coalition is very telling:
If FX customer assets are no more than a backstop for futures customers in the event of bankruptcy then retail forex traders need to think long and hard before opening an account with a FCM whose primary business is futures. That is what is at stake in the adversary suit expected to be filed.
Last edited by FCMReform; October 12th, 2012 at 12:54 PM.
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FXCM has been lobbying in Washington to extend such protections to retail forex traders as well. FXCM supports tougher accounting standards, customer insurance and a requirement that all FCM's disclose their fully audited financials to the public. We are encouraging traders to submit their comments to the CFTC at firstname.lastname@example.org.
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