Friday March 12, 2021 - 15:33:15 GMT
Global-View.com - www.global-view.com
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A Warning to All Traders
I have never been a big fan of high leverage as most traders do not know how to manage it. This is especially true of new traders as they see it as a way to get rich quick All it takes is for news algos to react to a surprise headline, even an innocuous one, to see a high leveraged account get wiped out. Brokers are not charities and only offer high leverage if they see that it works to their advantage.
All of this is changing as one of the last holdouts, ASIC, has joined other major financial centers in drastically cutting back retail trading leverage. In this regard, see the following., which I received from an Australian broker. Then scroll below it to see my warning.
The Australian Securities and Investments Commission (ASIC) has introduced new regulations that will change the way we can offer our products and services to retail clients trading with (broker name omitted), our ASIC licensed entity. The ASIC changes come into effect on 29 March 2021, As a retail client, the following changes will apply to you:
Leverage changes
From 28 March, clients of our ASIC licensed entity can only trade with up to 30:1 leverage as a retail trader. This will only affect new positions opened from 28 March and existing ones will be kept on the same leverage. Professional clients can continue to maintain the same leverage as before.
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………….Instruments..……….….
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Current Max Leverage
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New Max Leverage
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Major currencies
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500:1
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30:1
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Minor currencies
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200:1
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20:1
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Major indices _+ gold
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200:1
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20:1
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Commodities + minor indices
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500:1
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10:1
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Shares, + other underlying assets
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20:1
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5:1
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Digital assets
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10:1
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2:1
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A warning to all traders
One concern is that retail traders will look to brokers that offer high leverage in locales where registration is lax and probably not worth the paper it is written. This may be a strong attraction to some but it comes with risks as lax regulation offers limited protection to the account holder.
So there are two warnings. First, do your due diligence if considering opening an account with a broker headquartered in a jurisdiction where there is lax regulation. Protection of one’s capital is the key to staying alive in the trading business. Second, don’t simply be attracted by the lure of high leverage, Remember, it is a two-edged sword, one side tends to be sharper than the other.
Feel free to contact me with any questions or comments. Contact me as well to ask for details on my newly added 3 Step Trading Strategy.
Jay Meisler, co-founder
Global-View.com
[email protected]
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