Comment Text:
To whom it may concern,
Recently, I began looking at charts and opening demo accounts to get back into the swing of trading while in school. It's been a while and since then, the NFA-guided CFTC regulations have gone into effect.
After a few months of figuring out ways to counteract two of the main three retail forex killers (hedging and leverage)....the biggest problem is FIFO. I've read your websites, forex forums, blogs and broker press releases....yet the only thing I can find as justification for FIFO is "more transparency" for retail traders.
Let me clear this up for you, or you can e-mail back to me the names and e-mails of who I need to resend this message. These three regulations are nothing but a way to sucker inexperienced traders into losing real money quicker than ever before. Let me explain:
1) 1:50 leverage | I consider this the least of the three. While irritating, for most traders, it forces them to lower their lot sizes in order to avoid margin calls while also forcing them to make better entries. What is the most irritating is the assumption and blindness of the CFTC regarding leverage. What you've really done here is allowed inexperienced traders to over-leverage and allow banks and brokers to manipulate price in order to force a margin call.
2) Hedging | Hedging could have been used to combat the leverage somewhat, but it was taken away as well. The main use of leverage was to allow swing traders to trade intra-day if a good setup was forming. Now we can't. Why? if anything, hedging could be used to lock in a drawdown while looking for another setup for offset the potential loss. Again, all you've done is allow banks and brokers to force traders into a direction with no other reason than "transparency."
3) FIFO | This is the most inexplicable regulation I've ever seen. Occasionally swing traders like to scalp or trade intra-day while waiting for a longer-term position to play out. Why should we not be allowed that option? Once again, it can be used, to offset potential losses.
The response I see most, so far, is that this protects retail traders from fraud? How? One simple regulation could have solved ALL of the problems...force banks and brokers to straight through process of market orders and to mask limit orders from banks and brokers completely until fulfilled. Even if that's not completely possible, you have to understand that it's the clients job to understand and do their due diligence to become a successful trader.
It's not any regulatory agency's job to force traders to trade a certain way...it's a regulator's job to force the market makers to play fair. All you've done is allow for the banks to take more and more money from inexperienced traders.
ALL of these can, of course, be circumvented. Creating multiple accounts to trade both directions, or one for swing trading, one for scalping, one for intra-day....but you can't honestly believe that's easier on any retail trader, experienced or otherwise. These have made the lives of traders more difficult in every respect.
You've failed to protect consumers from anything...instead harming them and their possible livelihoods in the name of fraud protection. These rules are at the least disingenuous, and at best, criminally negligent. Not only that but you force American citizens to use US brokers that are controlled by these rules. Gambling isn't even this regulated. I'm not forced to gamble in the US. I'm not forced to spend only so much per hand. I'm not forced to place only one kind of bet.
I have several overseas friends that do very well in foreign exchange and every single one has opened a demo on US brokers...immediately commenting how FIFO is a killer not only to their trading style but to making money at all. The other two big regulations can be defended as forcing traders to become better (which isn't your job -- I'm not forced by the government to become a better cook just because my girlfriend doesn't like it). But FIFO has only ill-intentions...intentional or not.
