New ASIC regulations restricting leverage

thatone · 13 March 2021

Hi all,

new here and quite new to trading.

I need to understand what the new regulations mean for a trader like me? Will I ever be able to trade with a 300:1 leverage while I’m an Australian resident?

are there exchanges that will still allow this?

thanks!

peter2 · 13 March 2021

Yes, there are brokers (not exchanges) that will allow you to trade with the current high levels of leverage. However you must apply for this with your broker and meet their qualifying conditions to be treated as a "professional" (non retail) trader.

Brokers have different qualifying conditions to be treated as a "professional". It's very difficult for a new trader to qualify.

You must understand that being treated as "professional" trader you will give up some rights that are in place to protect retail traders. If you don't understand what you're giving up then you're not ready to be treated as a non retail trader.

The new leverage limits will force retail traders to reduce the size of their trades by 10.

eg. Trading 1 standard lot of $100K (FX) would require a margin of $333 in an account with 300:1 leverage.
The new limit means an account must now have $3333 as the margin for a 1 std lot trade position.

An account with $1000 in it cannot open a 1 std lot trade when the new limits are applied.

thatone · 13 March 2021

Thank you so much, that clears the confusion! Appreciate it

thatone · 14 March 2021

Hi @peter2

one last thing, I’m currently trading with an equity of $15000 and trade on AUD/USD only. My question is when I put a trade on $100,000, currently I require a margin of $333, so does that mean the only change for me will be that I now need a margin of $3000 to do the same trade?

Then doesn’t that just work for someone like me if I have enough capital to ride the market until my position is favourable?

I don’t know if I’m explaining it correctly but isn’t the risk less for a trade that is new but has enough capital?

I guess the other thing is that I won’t be able to do multiple simultaneous orders

Cam019 · 14 March 2021

This isn't meant to be disrespectful, just honest. Your explanation is exactly why they are reducing the leverage from 500:1 to 30:1 for retail traders. I'll come back when I can and address your post.

Cam019 · 14 March 2021

I'm assuming you're trading with 300:1 leverage.

Under the new rules, if you need currently need $333 to open that 1 lot trade, you will need $3,330 margin to open that same position as of March 29th. The margin required to keep a trade on regardless if it is in profit or loss is the same, it never changes once the position is open.

The way to you need to look at this position is like this:

With a 1 lot position size, you are controlling $100,000 worth of AUDUSD. You have $15,000 equity. If you position goes against you 15%, you will lose your whole account. Does that make sense?

thatone · 14 March 2021

Cam019 said:
I'm assuming you're trading with 300:1 leverage.

Under the new rules, if you need currently need $333 to open that 1 lot trade, you will need $3,330 margin to open that same position as of March 29th. The margin required to keep a trade on regardless if it is in profit or loss is the same, it never changes once the position is open.

The way to you need to look at this position is like this:

With a 1 lot position size, you are controlling $100,000 worth of AUDUSD. You have $15,000 equity. If you position goes against you 15%, you will lose your whole account. Does that make sense?

Yes perfect thank you

thatone · 14 March 2021

thatone said:
Yes perfect thank you

@Cam019 so if the dollar is 0.78, will it have to drop to drop to around 0.66 for me to lose that position?

Cam019 · 14 March 2021

Remember a 1 pip move in AUDUSD for a 1 lot position size is $10USD. So, let's use 0.7800 as the conversion. Your account in USD is $11,700. Which means, yeah it would need to drop to around 0.6630. This is without considering spreads, entry and exit slippage, swap fees and commissions.

Cam019 · 14 March 2021

Try this to position size your trades correctly.

thatone · 14 March 2021

Cam019 said:
Try this to position size your trades correctly.

Thank you so much

thatone · 14 March 2021

Cam019 said:
I'm assuming you're trading with 300:1 leverage.

Under the new rules, if you need currently need $333 to open that 1 lot trade, you will need $3,330 margin to open that same position as of March 29th. The margin required to keep a trade on regardless if it is in profit or loss is the same, it never changes once the position is open.

The way to you need to look at this position is like this:

With a 1 lot position size, you are controlling $100,000 worth of AUDUSD. You have $15,000 equity. If you position goes against you 15%, you will lose your whole account. Does that make sense?

Thank you so much! Are there any brokers that have a decent reputation and aren’t regulated by ASIC?

Cam019 · 14 March 2021

Unsure. But, decent reputation and unregulated by ASIC are highly unlikely to go in the same sentence.

New ASIC regulations restricting leverage

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