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Daily Loss Limit supervised by Broker/Software


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Daily Loss Limit supervised by Broker/Software

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  #11 (permalink)
Market Wizard
Boca Raton
 
Experience: Advanced
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Sandpaddict View Post
Unfortunately brokers are out to make profits not save traders from themselves. So this is why I think they are less likely to pursue this more. If even a quarter of the active traders used a daily stop that might make quite an impact on revenue. But Im surprised as well to the extent.

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I could argue that "save traders from themselves" has a million points of data. Overtrading, size, risk management, etc.
Software can't address every single one of these points.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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  #12 (permalink)
Langley
 
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mattz View Post
I could argue that "save traders from themselves" has a million points of data. Overtrading, size, risk management, etc.
Software can't address every single one of these points.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Yes I totally agree.

My particular point was only that the motivation isn't in the brokers best interests thats all.

But your %100 right. That is just ONE tiny thing out of massive pool of trading mistakes we make as traders. I have also personally found it lacking in almost every software package Ive been on. But thats my experience. Can't say for others.

Funny though they all have MARGINS to protect THEMSELVES? Hmmnnn

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  #13 (permalink)
Market Wizard
Boca Raton
 
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Sandpaddict View Post
Yes I totally agree.

My particular point was only that the motivation isn't in the brokers best interests thats all.

But your %100 right. That is just ONE tiny thing out of massive pool of trading mistakes we make as traders. I have also personally found it lacking in almost every software package Ive been on. But thats my experience. Can't say for others.

Funny though they all have MARGINS to protect THEMSELVES? Hmmnnn

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The margins are also in place to protect YOU against having too much leverage when volatility spikes due to geopolitical/external circumstances as dedicated by the exchanges. This was recently demonstrated during COVID19 and the spike of oil.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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  #14 (permalink)
Langley
 
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mattz View Post
The margins are in place to protect YOU against having too much leverage when volatility spikes due to geopolitical/external circumstances as dedicated by the exchanges. This was recently demonstrated during COVID19 and the spike of oil.

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

I have to disagree. The margins are there to protect THEM from YOU blowing your account and THEM being on the hook for it. Margins are basically good faith deposits and they change based on implied or realized volatility like you said.

The larger the volatility in the market, be it geopolitical or otherwise the larger the margin requirement because it increases the chance you'll lose more than whats in your account.

Please let me know if I misunderstood you. That was not my intention.


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  #15 (permalink)
Market Wizard
Boca Raton
 
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Sandpaddict View Post
I have to disagree. The margins are there to protect THEM from YOU blowing your account and THEM being on the hook for it. Margins are basically good faith deposits and they change based on implied or realized volatility like you said.

The larger the volatility in the market, be it geopolitical or otherwise the larger the margin requirement because it increases the chance you'll lose more than whats in your account.

Please let me know if I misunderstood you. That was not my intention.


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Not sure if you noticed, I am a broker.

You have the right to disagree; however, I find your point of view cynical, and you are confusing regulatory risk management with software features.
We started this discussion with additional tools that could help traders versus why brokers implement margins.

I will not disagree with the apparent concern of deficits. But, I also find that increase in margins can cause less revenue for brokers, but it may preserve the customer's capital in the long run. In fact, during COVID 19, I saw many FCMs increase their margins beyond what CME required, again, to protect the customers as well.

Lastly, please keep in mind that many of the features that you tend to think brokers do not want to implement (or do not care) is because they are not programmers.
Many of us use a third-party software, and it's not up to us whether one feature or another is implemented.

To illustrate the point that we do care, I did add the feature to let customers know whether they reached their loss level. here

If I could also add the features in the world to help traders, I would, including the disclaimer before each trade, "are you sure you want to enter this trade, and did you do your homework about trading? The trade you are about to enter may involve stress. Please consider Yoga or Underwater basket weaving instead."


Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results

Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email support@OptimusFutures.com
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  #16 (permalink)
Langley
 
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mattz View Post
Not sure if you noticed, I am a broker.

You have the right to disagree; however, I find your point of view cynical, and you are confusing regulatory risk management with software features.
We started this discussion with additional tools that could help traders versus why brokers implement margins.

I will not disagree with the apparent concern of deficits. But, I also find that increase in margins can cause less revenue for brokers, but it may preserve the customer's capital in the long run. In fact, during COVID 19, I saw many FCMs increase their margins beyond what CME required, again, to protect the customers as well.

Lastly, please keep in mind that many of the features that you tend to think brokers do not want to implement (or do not care) is because they are not programmers.
Many of us use a third-party software, and it's not up to us whether one feature or another is implemented.

To illustrate the point that we do care, I did add the feature to let customers know whether they reached their loss level. here

If I could also add the features in the world to help traders, I would, including the disclaimer before each trade, "are you sure you want to enter this trade, and did you do your homework about trading? The trade you are about to enter may involve stress. Please consider Yoga or Underwater basket weaving instead."


Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results

Hello again mattz. Yes I did notice you were a broker. That does not change reality.

I ment no harm or to purposeful be cynical.

You are however right that I'm probably a little more cynical than need be but I DO TRY to be balanced BUT at the same time be REALISTIC.

I must be missing something?

You said many brokers increased their margins over CME requirements. That only goes to what I was saying is thats a risk measure BY BROKERS to protect themselves... and by proxy thier customers.

I have zero belief that brokers want their customers to do badly. Im positive they ABSOLUTELY want their customers to be around forever. Unfortunately thats not realistic. And its not good business practice as Im sure you well know.

But hey great mattz if you can help traders setup their own automated daily stops thats absolutely amazing!!!

I'm all about anything that helps individual traders!


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  #17 (permalink)
Legendary Market Wizard
Winnipeg, MB Canada
 
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@mattz, hoping you can clarify my thinking and answer a question for me to help with my understanding here.

First, when margin is set in futures it isn't to protect the traders over-leveraging or the brokers involved in arranging trades, it's to protect the counterparty on the sell side of the trade and minimize up-front costs for buyers. When a farmer sells futures to hedge a crop they want to ensure that the person buying their contracts has the ability to pay at expiry/delivery. When an oil refiner buys futures to cover future production needs they don't want to have to put up the entire cost until they actually take delivery of the physical oil. The exchange sets margins so that the farmer doesn't have to worry about the buyer having the capital to buy and so that the oil refiner doesn't have to put up 100% of the capital until delivery. The level of margin is set to balance these two competing needs. Am I thinking about this correctly?

Second, I'll give an example as a question. Lets say a day-trader over-leverages, can't get out of a position and ends up with a $1MM debit position. They can't cover this so declare bankruptcy (and probably will never be able to touch an account again). Who would be on the hook for these losses, would it be the IB, the broker, the clearer, or the exchange itself which would then in theory need to increase fees charged to other traders to cover these losses? Would the broker be responsible for the difference between the maintenance margin set by the exchange and the day trade margins that they offered the client?

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  #18 (permalink)
Market Wizard
Boca Raton
 
Experience: Advanced
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Broker: We are a Broker.Optimus Futures, LLC
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Posts: 2,471 since Sep 2010
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Sandpaddict View Post
I must be missing something?

You said many brokers increased their margins over CME requirements. That only goes to what I was saying is thats a risk measure BY BROKERS to protect themselves... and by proxy thier customers.

I have zero belief that brokers want their customers to do badly. Im positive they ABSOLUTELY want their customers to be around forever. Unfortunately thats not realistic. And its not good business practice as Im sure you well know.

But hey great mattz if you can help traders setup their own automated daily stops thats absolutely amazing!!!

I'm all about anything that helps individual traders!


Sent using the futures.io mobile app

If I talk to any new trader, I tell them that size is the most important thing (in my opinion) when it comes to the success of their trading career. They could be highly disciplined, have proper risk management, and have a precise and straightforward method. However, oversized trades relative to account size will lead to a short trading career. In the context of margins, I'd like to think that raised margins are also a signal to the traders to reduce their size. Whether its directly, indirectly, or by proxy.

We will continue to add features that I consider useful for better trade management. The one we added with Profit and Loss alerts is just the first one.

Thanks,
Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email support@OptimusFutures.com
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  #19 (permalink)
Langley
 
Experience: Intermediate
Platform: IB
Trading: Futures
 
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mattz View Post
If I talk to any new trader, I tell them that size is the most important thing (in my opinion) when it comes to the success of their trading career. They could be highly disciplined, have proper risk management, and have a precise and straightforward method. However, oversized trades relative to account size will lead to a short trading career. In the context of margins, I'd like to think that raised margins are also a signal to the traders to reduce their size. Whether its directly, indirectly, or by proxy.

We will continue to add features that I consider useful for better trade management. The one we added with Profit and Loss alerts is just the first one.

Thanks,
Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Yeup. With ya %100.

Size both in terms of leverage as well as outsized losses. Not that thier exclusive and that just compounds the situation. Now you can be out of the game in ONE trade!... very quickly!

As a broker Im sure you can see what size can, does, and will do, nevertheless you are a business and maximizing your profits should be in your best interest. Not necessarily the intrests of your customers. Again not that they have to be exclusive.

I'm not at all being cynical. Maybe too cautious. I really like the alerts idea and hopefully more traders stick around trading through you.

Thats a win win.


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  #20 (permalink)
Market Wizard
Boca Raton
 
Experience: Advanced
Platform: Optimus Flow
Broker: We are a Broker.Optimus Futures, LLC
Trading: Futures
 
mattz's Avatar
 
Posts: 2,471 since Sep 2010
Thanks: 2,398 given, 3,676 received



MWG86 View Post
@mattz, hoping you can clarify my thinking and answer a question for me to help with my understanding here.

First, when margin is set in futures it isn't to protect the traders over-leveraging or the brokers involved in arranging trades, it's to protect the counterparty on the sell side of the trade and minimize up-front costs for buyers. When a farmer sells futures to hedge a crop they want to ensure that the person buying their contracts has the ability to pay at expiry/delivery. When an oil refiner buys futures to cover future production needs they don't want to have to put up the entire cost until they actually take delivery of the physical oil. The exchange sets margins so that the farmer doesn't have to worry about the buyer having the capital to buy and so that the oil refiner doesn't have to put up 100% of the capital until delivery. The level of margin is set to balance these two competing needs. Am I thinking about this correctly?

Second, I'll give an example as a question. Lets say a day-trader over-leverages, can't get out of a position and ends up with a $1MM debit position. They can't cover this so declare bankruptcy (and probably will never be able to touch an account again). Who would be on the hook for these losses, would it be the IB, the broker, the clearer, or the exchange itself which would then in theory need to increase fees charged to other traders to cover these losses? Would the broker be responsible for the difference between the maintenance margin set by the exchange and the day trade margins that they offered the client?

You do not have a single counterparty that you are up against. You could be Long the ES as part of a hedge against someone who is Short longterm, and you may have existed your positions by the end of the day offsetting with another party. The entity short the ES is just a position right now.

The exchange, in my opinion, is not concerned with one single player. Rather, the strength of the FCM overall in terms of the funds they have in total for customer's margins.

I don't want to discuss in a public forum liability issues. I would be happy to discuss this over the phone—all I can say that deficit is not a pretty situation.

Thanks,
Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email support@OptimusFutures.com
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