In Jan 2010, the US Commodities and Futures Trading Commission (CFTC) and the National Futures Association jointly proposed a new direction for US-based Forex Brokerages that will affect us forex traders. Most brokers, currently offer leverages of 1:100, 1:200 and some as much as 1:500 – and the two regulatory fronts intend to lower this leverage to 1:10!
What does that mean for us? Basically everything. It’s EXACTLY due to leverage that we are able to make $10s, or $100s of dollars from a 3rd decimal price movement in a currency pair – and that’s with an account with a large trading margin. Whence the proposed changes are implemented, the same $5000 account that earns you $10s to $100s per trade will only be good for dollars to $10s per trade. Not only that, you would not be able to simultaneously involve in several trades – which most good traders do, to offer a balanced portfolio to their investment – because your trade margins would be MAXED OUT before you know it!
As if the ban on hedging wasn’t enough, just think about it. Right now, with that $1000 in your FX account, you can trade up to $100,000, $200,000 or even $500,000 in a single trade. But with the change, your $1000 account will only be good for trades of $10,000.
The rationale behind it? Banks and financial institutions don’t usually leverage more than 1:10 on their trade capital – but that’s for the low-risk/low-gain. With the proposed changes, I can’t even put in all 3 trade positions as required by my favorite Trend Forex 2.0 system to trade a single currency pair!
Until recently, it was an boasted feature that a forex broker was a NFA or FSA-regulated one. Not since. Consequently, many Forex Brokers are looking off-shore and overseas for a solution and scape of these tight rulings. London and Australia have become the new safe-havens for some. However, the UK Financial Services Authority (FSA) is pipped to follow suit, and we wouldn’t be making any new ground, whilst the high wage costs in Australia also mean higher bid/offer spreads. Even in off-shore locations like Cyprus, British Virgin Islands and the Dominican Republic, the other consideration is that efficiency in account deposits and withdrawals will surely suffer due to firm’s non-elective use of auxiliary banks.
I had the good luck and fortune recently, to meet some of the key staff from FXPrimus.cc (website http://www.fxprimus.cc) while they made their scouting and marketing trip here in Singapore. FXPrimus.cc uses MT4, or rather, the most-favored platform by chartists and Expert Advisor (EA) Traders. Yes! They so support hedging! Leverage up to 1:500. Featuring Straight-through Processing (STP) with no chance of the sickening “re-quotes”s, trade Forex, Forex Options, CFDs, and Metals all on one platform. ECN rates from just a $2,500 account starting size. FXPrimus.cc is also Incorporated and compliant with the Financial Services Commission (FSC) in Mauritius, and as such, unlike other off-shore locations, they benefit from a first-tier access to international banks, without having to go through auxiliaries. I was very attracted to the GlobalCollect deposit/withdrawal feature, which allows fx traders to deposit fund into a local bank account, thus saving time and money. Not in the least, they have an independant third party fund admin to ensure the safety of our funds. Click the picture below to find out more and try their platform!
