“leverage in retail forex customer accounts would be subject to a 10-to-1 limitation,”

It seems they are proposing a 10 to 1 maximum leverage for retail traders.

Most retail traders are small account traders compared to institutions.

It may seem that the CFTC is trying to “safeguard” the trading public and marketplace with these new proposed changes. However the reality is that most financial disasters that occur because of over leveraged trading are because of a rogue trader at an institutional trading desk who is trading unchecked and without restraint.

Most retail traders currently trade at upwards of 100 to 1 or even 200 to 1 leverage. Most retail traders also trade less than 10 standard size lots which is less than 1 million dollars worth of currency. The current standard leverage amounts allow traders to control $100,000 worth of currency for a $500 or $1000 margin.

If the new rules are enacted  it will mean traders will have to put up $10k to trade a standard size lot of foreign currency, instead of $500 or $1000.

This will put most retail traders out of business and many retail forex brokers will go with them by the wayside. Instead institutional FX trading desks will continue to thrive and trade higher leveraged amounts.

Instead of safeguarding the industry the new rules will put a damper on the industry in general yet still allow institutional traders to continue to trade with the higher unchecked leverage amounts.

In other words the new rules will do nothing but curb the growth of one of the fastest growing sectors in the financial services and markets.

Since forex dealing desks and retail brokers are highly computerized and mark to market on a tick by tick basis, there is virtually almost zero chance that a retail trader would go into the red on a bad trade. His position would be liquidated well before the balance on his account went into negative territory.

On the other hand, many institutional transactions are done with a phone call and a promise and not marked to market tick by tick, but by daily accounting, the promise to deliver funds on a trade are as good or as big as the institution behind the trade. Because of this, we unfortunately hear of over leveraged trading desks at times almost bankrupting a bank or trading firm because of a rogue trader.

We think the new 10 to 1 rule will cause retail traders to open accounts outside the USA and existing brokers will just funnel their retail USA business to a foreign trading desk.

The FX market is the larget market in the world.

Although the CFTC may appear to be doing something good for the industry, the bottom line is that it will ultimately end up not making much impact and become difficult to implement effectively.

If you are just starting out in the stock trading business or if you are already in it, you may have heard the term Forex trading quite a few times, but you probably might not have a clue on what it may actually mean.

Forex or foreign exchange trading is actually the largest and a fast-rising financial industry in stock trading these days. Here is a quick introduction to trading in foreign exchange.

What Is Forex Trading?

The Foreign Exchange market (Forex) is actually the largest financial market in the world. It actually makes a volume of over 2 trillion U.S. dollars a day, and as compared to its counterpart –the New York Stock Exchange (NYSE) which usually only trades a volume of 25 billion dollars each day, this industry is so huge that it becomes a profitable playground for many investors including central banks, large banks, multinational companies and even governments.

What is actually traded on the foreign exchange is money. It actually consists of the concurrent buying and selling of currencies, which are traded through brokers and are traded in pairs.

When you are buying currency, it is like you are investing on the economy of a particular country. For example, if you buy U.S. dollars then it is as if you are buying a share of the U.S. economy. Whatever the market thinks about the current health of a country’s economy would directly be reflected on the price of its legal tender and this is how currencies go up or down.

Forex Trading For The Masses

Originally the whole concept of trading in the Foreign Exchange was only intended for huge companies and banks, but not for normal citizens. After all, you could only take part in the trade if you have around ten to fifty million dollars minimum.

However, with the rise of globalization through the Internet, trading is now offered to retail traders. And these days, almost anyone can now invest on the foreign trade. All you really need to join is some small amount of money, a computer and a high-speed Internet connection, and you can sign up for an account with online Forex trading firms.

There is no exact physical office for Foreign Exchange unlike its counterpart in New York. However, the three main centers for this trade are United States, United Kingdom and Japan. These countries handle majority of Forex transactions and trades goes on for 24 hours everyday.

Today, the Foreign Exchange, as the largest market in the world, is fast paced and enormous. And it has become a very lucrative arena for many traders who may have had participated in stock trading and in other markets. Many large institutions and even smaller-based individuals have gone out to play in this market.

Although this particular market gives huge promises, remember that there is still too much at stake. It is estimated that around 70 to 90 percent of the Foreign Exchange market is still speculative. And the parties that trade currencies may not always have a plan to actually take delivery of the said currency, and more are still speculating on movement of money.

If you are interested in investing in this particular arena, take time to be familiar with the game and make sure you get the right educational background. Taking the extra mile will all be worth it, and once you have tasted your success in this arena, you will be ready to take on anything in trading.

The Foreign Exchange or Forex is the largest market today for stock trading, and it is continually growing with more and more people investing in it. However, as promising as this market may be when it comes to profit, like any other trade it can be very volatile as well.

It is therefore important to be familiar with certain factors that influence trends in the Forex market if you are decided in joining this arena. After all, acquainting yourself with the many scenarios that can cause currencies to go up or down can help you a lot in making decisions for when to buy or sell.

There are basically three major factors that affect the Foreign Exchange –a country’s economy, political conditions and market psychology.

Economy

Economic factors are the most basic things that create changes in a country’s currency. When such economic conditions as a budget deficit or surplus is present within a country, there will surely be reactions in the market and values will be reflected on currencies. Other conditions may also include inflation trends, and the general economic growth of the country.

The more prosperous a country’s economy is, the more investors will be able to adhere to doing trade in a more positive attitude. Such indicators as a growth in a nation’s gross domestic product (GDP), employment levels and retail sales among others will basically attract more investors and that nation’s currency value will likely go up.

Political Conditions

Another very important factor that influence trends in Forex, are the conditions of a country’s political sector. This is because political instability or turmoil can generally create negative fluctuations to an economy. But if such instances occur wherein a country may rise above political obstacles, the opposite may occur and the economy may improve.

Events in a region can surely create negative or positive interest among investors for a nation’s currency. And so, such conditions surely influence the trends for demands and prices of a certain currency.

Market Psychology

Of course, the perception of traders and investors will greatly influence the Foreign Exchange market in so many ways. After all, the market is highly dependent on whether or not people would want to invest on a country’s economy in order to determine whether currency prices will go up or down.

For example, such conditions wherein unsettling international events may happen, then under the “flight of quality” rule, people would generally want to look for a safe haven for their investments. Whenever there is a greater demand for a certain country’s economy, then a higher price will be given to buyers and the currency’s value will go up and become stronger.

Other events that contribute to traders’ perceptions may be long-term trends where people invest based on what they have seen for a long period and time, and even economic numbers where people may base their investments depending on what numbers show a greater value.

The market in Foreign Exchange is often unpredictable and fluctuating. Therefore if you are interested in doing trades in this market, make sure that you take the time to be knowledgeable about good strategies that can help you play the game.

But more importantly, keep in updating yourself with the different economic trends in the international scene. After all, this currency market would greatly revolve upon events that would occur in the different countries. Familiarizing yourself with the factors that affect the Forex will surely help you make better decisions.

With offices on Wall Street, in the U.K. and Russia they are one of the growing firms in the global forex brokerage arena.

A distinguishing feature of Alapari U.S. is that they are a registered member of the CFTC and the NFA. Which basically means that they have stricter accountablitily in terms of compliance. One such example of this is their maximum leverage ratio of 100:1 for trading.

On a recent phone call with Alpari it was noted that as of November 2009 all U.S. brokers will have to comply with new rules that limit maximum leverage on forex contracts to 100:1 and that firms that offer more such as 200:1 or 500:1 (at least in the U.S.) will be out of compliance and breaking the laws regarding new NFA rules.

Many smaller lot traders prefer trading 200:1 or even 500:1 so these new rules may affect trading strategies.

Alpari offers a micro account which is similar to other micro accounts which are sized at .01 in addition the offer a retail account which is sized at 0.1 which is the usual size for mini accounts at other firms.

Another interesting factor is that the size limits on a  position with their micro account is $100k or one standard lot, and their position limits on their retail accounts have no limits.

Many over the counter forex brokers have a stated 50 lot or 100 lot limit on their positions, but Alpari is one of the few retail FX brokers that have no size limits on their standard accounts.

One thing to note is that Alpari does not guarantee “no negative balances”. Most firms in the retail FX arena do have a “no negative balance” policy, however Alpari does not. So in the very worst case scenario, you could be on the line legally for more than your risk capital. In this day of totally automated and hedged contracts on the broker side, positions usually get closed well before margins are wiped out, however Alpari does leave themselves a legal loophole to their own advantage. This is probably why they can offer no position size limits because they ultimately transfer all risk to the trader. This policy and procedure is pretty standard operating procedure in the futures and commodities markets with futures brokers, but recently in the retail forex arena many brokers offer a “no negative balance” guarantee.

Lastly setting up an account with Alpari is easy and straightfoward. They accept Credit Cards, PayPal, and bank transfers. Withdrawls are by check or wire transfer direct to your account.

For their retail account there is a $1000 minimum.

For their micro account there is NO minimum, so they become a good choice for testing new EAs in a live environment.