5. Margin Q&A

DailyFX Forum Administrator · #1 (**permalink**) 10-16-2009, 05:16 PM

If you have questions regarding the New FXCM LLC (US Entity) Margin changes, feel free to ask them here.

waves · #2 (**permalink**) 10-27-2009, 06:38 PM

is there anyway we can avoid this? no special requests, margin change forms we can sign to keep our current leverage? 400:1 for example? ......

Sean Hyman · #3 (**permalink**) 10-28-2009, 10:04 PM

Quote:

Originally Posted by waves

is there anyway we can avoid this? no special requests, margin change forms we can sign to keep our current leverage? 400:1 for example? ......

waves, no the NFA in the U.S. is enacting this rule for firms that it regulates, across the board. No one is exempt from it.

Even the FSA in the UK is adopting similar rules when it comes to dialing down the leverage a bit.

You have to keep in mind though that stocks are generally 2:1 and commodities are roughly 10:1.

So you're still going to have MANY times what any other market has in leverage, even still.

However, you will find that it will cause many people's accounts to be sustained better overall. You see, most people don't start off "getting it right" in their trades. It takes a bit for them to get past the learning curve...but sometimes they're out of cash before they get to that point because they levered up too much to start with.

If there's a way that newer traders err, it's to the side of being over leveraged vs. being lower levered.

waves · #4 (**permalink**) 10-30-2009, 02:27 AM

Yeah i just dont see the difference, the new rules just mean people need to have more money sitting idle in their account. This time when they blow their accounts they will have enough money left over for 2 weeks grocerys instead of 1. people will still max out margin limits. I know its not fxcm but rather the government regulations that are in place to hold the hand of the adults that are too dumb to cross the street by themselves. FXCM needs an iran or north korea branch lol haha ok... thanks for the response Sean

Quote:

Originally Posted by Sean Hyman

waves, no the NFA in the U.S. is enacting this rule for firms that it regulates, across the board. No one is exempt from it.

Even the FSA in the UK is adopting similar rules when it comes to dialing down the leverage a bit.

You have to keep in mind though that stocks are generally 2:1 and commodities are roughly 10:1.

So you're still going to have MANY times what any other market has in leverage, even still.

However, you will find that it will cause many people's accounts to be sustained better overall. You see, most people don't start off "getting it right" in their trades. It takes a bit for them to get past the learning curve...but sometimes they're out of cash before they get to that point because they levered up too much to start with.

If there's a way that newer traders err, it's to the side of being over leveraged vs. being lower levered.

Sean Hyman · #5 (**permalink**) 10-30-2009, 01:20 PM

Quote:

Originally Posted by waves

Yeah i just dont see the difference, the new rules just mean people need to have more money sitting idle in their account. This time when they blow their accounts they will have enough money left over for 2 weeks grocerys instead of 1. people will still max out margin limits. I know its not fxcm but rather the government regulations that are in place to hold the hand of the adults that are too dumb to cross the street by themselves. FXCM needs an iran or north korea branch lol haha ok... thanks for the response Sean

Yeah, they're trying to help people to tone it down for their own good. Even still, you've still got more leverage than stocks or commodities even with the new levels.

So your profitability won't be determined by 50:1 or 400:1 leverage....it will be determined by you making the right directional calls within your account AND using prudent risk/money management along the way.

So this doesn't worry any of us pros because we never use anywhere near what we had available to us anyway.

Leverage is like a Corvette....sure it may do close to 200 mph but it doesn't mean you can't drive 55 mph like everyone else.

kjjack · #6 (**permalink**) 10-30-2009, 11:03 PM

so, just a quick question. If I currently have a 50:1 leverage account, and I have 1 lot of EUR/USD, which equates to 1 pip = $1 USD, will this still be the same when the leverage is changed?

Thomas Long · #7 (**permalink**) 11-02-2009, 08:47 AM

Quote:

Originally Posted by kjjack

so, just a quick question. If I currently have a 50:1 leverage account, and I have 1 lot of EUR/USD, which equates to 1 pip = $1 USD, will this still be the same when the leverage is changed?

Yes....the value of each pip will not change, only the margin requirement will. You just need more money to control the same number of lots than you previously needed. But if you are using 50:1 leverage, your margin requirements will not change either as the new margin for opening one standard lot of the EUR/USD will be $160 while 50:1 leverage would require $200 in margin.

scopen · #8 (**permalink**) Yesterday, 11:01 PM

Last I checked, EUR/USD closed today at 1.4861. On a standard lot, 100 to 1 would be $148.61. Why is FXCM pegging margin on EUR/USD at $160?