How to Verify the CFTC Registration of a US Forex Broker ...

5 Things I'm Watching Today (Tuesday, Nov 27th)

As always, thanks for reading. Any feedback on how to make this bettemore useful is always welcome.
  1. Growing tariff threat: Trump threatened to follow through with 25% tariffs on Chinese goods, up from 10%, starting in January. Meeting between Trump and Xi might be the best (last?) chance to defuse tensions (Washington Post). This could all be expectation setting though (if it's something like "look, it was going to be 25% but we kept it at 10%!" Really nothing changed). What counts as a "ceasefire" isn't much.
  2. All Fed all week: Lots of Fed action on the calendar this week. Clarida is the most important today (said he backs gradual hikes as the neutral rates remain uncertain, but also said TIPS shows inflation "somewhat" below 2% target). WSJ overnight said Fed will be data-dependent, which is as expected, but that inflation expectations might start to be more of a factor, especially if it keeps falling. And note, core is the most important metric - so strip out oil prices. Still the most important this week is Powell's speech in NY (Wednesday at 11:30 am ET).
  3. Rising rates as fewer foreign buyers purchasing Treasuries: Reuters talked about this overnight. This could be a big headwind if it pushes borrowing costs even higher.
  4. Dollar headwind on growing net-long positioning: Reuters talked about this overnight. Could be a headwind to earnings growth next year, which is expected to fall into the single digits from 20%+ this year. Between rates and the dollar, there's less room for error in earnings season.
  5. Other headwinds to growth: The Wall Street Journal said the GM closings are a "fresh sign of worry" of slowing domestic growth. WSJ also said the "housing boom is coming to an end" on higher rates and affordability concerns. That alone is nothing new, but it gives us a better idea of when and how big of a drag housing will be on GDP growth (it has already been a net negative for at least the past quarter, so look for that to only get worse). Bloomberg said capital spending is slowing, and might only get worse on trade concerns.
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So I recently learned about Dodd-Frank.

Alright so I was over at politics and some politician wanted to reverse net neutrality, the administration’s carbon and coal ash rules, and the Dodd-Frank financial regulations.
Well net neutrality is pretty damned important to me, regulating carbon and coal ash sounds pretty important as well. Then there is Dodd frank. On paper everything sounded great
an Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.
If we can regulate those too big to fail so they don't fail again so we have to bail them out again I'm all for it.
Well turns out the Dodd-Frank financial regulations forced CFTCs hands according to the article also linked later
Alright so I'm starting to get interested in the Forex market. Turns out the CFTC has recently made it illegal to trade with Forex brokers outside of the US, and all brokers within the US have to be regulated by the CFTC. Now what comes with that? Well 50:1 leverage which is to small. This article written at the time played right into the CFTCs hands praising them for choosing 50:1 over 10:1 when we all know that damned classic tactic of baiting to get what you want. If both options are shit you seem like a good person for choosing the non liquid shit. On top of that there is no hedging which as it turns out causes a major issue for me. Ctrader allows for hedging built in which means you can't use it within the US market since CFTC regulates all the brokers in the US that US citizens are required to use. Ctrader is just so much easier to use than the clunky 10 year old metatrader
TL;DR Dodd frank regulations forced the CFTC. That caused the CFTC to create shitty leverage force you into shitty programs with shitty or $10,000 entry US brokers that fuck over smaller Forex traders in the US. Which simultaneously locks you into shitty outdated programs for trading.
Go figure they hide something to fuck over the little guy in a legislation made to prevent the largest banks in the US from fucking up again.
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CFTC Hits Crypto-Forex Scheme with Fraud Charges

CFTC Hits Crypto-Forex Scheme with Fraud Charges submitted by makiavelicro to CashBits [link] [comments]

'Unick Forex' do Colorado é denunciada as autoridades pela CFTC

'Unick Forex' do Colorado é denunciada as autoridades pela CFTC submitted by MundoMoedas to bitcoinportugal [link] [comments]

CFTC warns about 20 new forex and binary options scams

CFTC warns about 20 new forex and binary options scams submitted by alexnes11 to economy [link] [comments]

@AlphaexCapital : CFTC Commitments of traders: EUR remains the largest short position. CAD is the largest long position https://t.co/hT4JDhogWu #forex #investing #bitcoin #crypto #xrp #btc #eth #forexsignals

submitted by AlphaexCapital to AlphaexCapital [link] [comments]

@AlphaexCapital : CFTC Commitments of Traders: Shorts in GBP and EUR see some squeeze https://t.co/qdll0J0Liw #forex #investing #bitcoin #crypto #xrp #btc #eth #forexsignals

submitted by AlphaexCapital to AlphaexCapital [link] [comments]

@AlphaexCapital : CFTC commitments of traders: EUR and GBP shorts are the largest speculative positions https://t.co/mFVIxrpdLP #forex #forextrading #investing

submitted by AlphaexCapital to AlphaexCapital [link] [comments]

@AlphaexCapital : CFTC commitment of traders: EUR shorts are being rebuilt over the last few weeks. https://t.co/9QgDac39Mf #forex #forextrading #investing

submitted by AlphaexCapital to AlphaexCapital [link] [comments]

@AlphaexCapital : CFTC commitment of traders: GBP shorts the greatest since April 2017 https://t.co/YQPi0b31X8 #forex #forextrading #investing

submitted by AlphaexCapital to AlphaexCapital [link] [comments]

@AlphaexCapital : CFTC commitment of traders: GBP shorts trimmed modestly. JPY longs increased. https://t.co/GBVAjetDws #forex #forextrading #investing

submitted by AlphaexCapital to AlphaexCapital [link] [comments]

@AlphaexCapital : CFTC Commitment of Traders: GBP shorts remain the largest speculative position https://t.co/yS7D3JCuTR #forex #forextrading #investing

submitted by AlphaexCapital to AlphaexCapital [link] [comments]

CFTC to Attend Court Sessions in Oasis Forex Scam Case after Court Order

CFTC to Attend Court Sessions in Oasis Forex Scam Case after Court Order submitted by asmajda to CryptoStock [link] [comments]

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live submitted by fxtradingpro to CryptoCurrencies [link] [comments]

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live submitted by fxtradingpro to Crypto_Currency_News [link] [comments]

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live submitted by fxtradingpro to CryptoCurrencyTrading [link] [comments]

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live submitted by cryptoallbot to cryptoall [link] [comments]

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live

CFTC Chairman Says Cryptocurrencies are Here to Stay - Forex Markets Live submitted by cryptoallbot1 to cryptoall [link] [comments]

[/r/forexhome] No-Show Estonian Forex Dealer Must Pay $11M In CFTC Case

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[/r/forexhome] No-Show Estonian Forex Dealer Must Pay $11M In CFTC Case

submitted by EestiMentioned to EestiMentioned [link] [comments]

[/r/forexhome] No-Show Estonian Forex Dealer Must Pay $11M In CFTC Case

submitted by EestiMentioned to EestiMentioned [link] [comments]

Former investment bank FX trader: Risk management part 3/3

Former investment bank FX trader: Risk management part 3/3
Welcome to the third and final part of this chapter.
Thank you all for the 100s of comments and upvotes - maybe this post will take us above 1,000 for this topic!
Keep any feedback or questions coming in the replies below.
Before you read this note, please start with Part I and then Part II so it hangs together and makes sense.
Part III
  • Squeezes and other risks
  • Market positioning
  • Bet correlation
  • Crap trades, timeouts and monthly limits

Squeezes and other risks

We are going to cover three common risks that traders face: events; squeezes, asymmetric bets.

Events

Economic releases can cause large short-term volatility. The most famous is Non Farm Payrolls, which is the most widely watched measure of US employment levels and affects the price of many instruments.On an NFP announcement currencies like EURUSD might jump (or drop) 100 pips no problem.
This is fine and there are trading strategies that one may employ around this but the key thing is to be aware of these releases.You can find economic calendars all over the internet - including on this site - and you need only check if there are any major releases each day or week.
For example, if you are trading off some intraday chart and scalping a few pips here and there it would be highly sensible to go into a known data release flat as it is pure coin-toss and not the reason for your trading. It only takes five minutes each day to plan for the day ahead so do not get caught out by this. Many retail traders get stopped out on such events when price volatility is at its peak.

Squeezes

Short squeezes bring a lot of danger and perhaps some opportunity.
The story of VW and Porsche is the best short squeeze ever. Throughout these articles we've used FX examples wherever possible but in this one instance the concept (which is also highly relevant in FX) is best illustrated with an historical lesson from a different asset class.
A short squeeze is when a participant ends up in a short position they are forced to cover. Especially when the rest of the market knows that this participant can be bullied into stopping out at terrible levels, provided the market can briefly drive the price into their pain zone.

There's a reason for the car, don't worry
Hedge funds had been shorting VW stock. However the amount of VW stock available to buy in the open market was actually quite limited. The local government owned a chunk and Porsche itself had bought and locked away around 30%. Neither of these would sell to the hedge-funds so a good amount of the stock was un-buyable at any price.
If you sell or short a stock you must be prepared to buy it back to go flat at some point.
To cut a long story short, Porsche bought a lot of call options on VW stock. These options gave them the right to purchase VW stock from banks at slightly above market price.
Eventually the banks who had sold these options realised there was no VW stock to go out and buy since the German government wouldn’t sell its allocation and Porsche wouldn’t either. If Porsche called in the options the banks were in trouble.
Porsche called in the options which forced the shorts to buy stock - at whatever price they could get it.
The price squeezed higher as those that were short got massively squeezed and stopped out. For one brief moment in 2008, VW was the world’s most valuable company. Shorts were burned hard.

Incredible event
Porsche apparently made $11.5 billion on the trade. The BBC described Porsche as “a hedge fund with a carmaker attached.”
If this all seems exotic then know that the same thing happens in FX all the time. If everyone in the market is talking about a key level in EURUSD being 1.2050 then you can bet the market will try to push through 1.2050 just to take out any short stops at that level. Whether it then rallies higher or fails and trades back lower is a different matter entirely.
This brings us on to the matter of crowded trades. We will look at positioning in more detail in the next section. Crowded trades are dangerous for PNL. If everyone believes EURUSD is going down and has already sold EURUSD then you run the risk of a short squeeze.
For additional selling to take place you need a very good reason for people to add to their position whereas a move in the other direction could force mass buying to cover their shorts.
A trading mentor when I worked at the investment bank once advised me:
Always think about which move would cause the maximum people the maximum pain. That move is precisely what you should be watching out for at all times.

Asymmetric losses

Also known as picking up pennies in front of a steamroller. This risk has caught out many a retail trader. Sometimes it is referred to as a "negative skew" strategy.
Ideally what you are looking for is asymmetric risk trade set-ups: that is where the downside is clearly defined and smaller than the upside. What you want to avoid is the opposite.
A famous example of this going wrong was the Swiss National Bank de-peg in 2012.
The Swiss National Bank had said they would defend the price of EURCHF so that it did not go below 1.2. Many people believed it could never go below 1.2 due to this. Many retail traders therefore opted for a strategy that some describe as ‘picking up pennies in front of a steam-roller’.
They would would buy EURCHF above the peg level and hope for a tiny rally of several pips before selling them back and keep doing this repeatedly. Often they were highly leveraged at 100:1 so that they could amplify the profit of the tiny 5-10 pip rally.
Then this happened.

Something that changed FX markets forever
The SNB suddenly did the unthinkable. They stopped defending the price. CHF jumped and so EURCHF (the number of CHF per 1 EUR) dropped to new lows very fast. Clearly, this trade had horrific risk : reward asymmetry: you risked 30% to make 0.05%.
Other strategies like naively selling options have the same result. You win a small amount of money each day and then spectacularly blow up at some point down the line.

Market positioning

We have talked about short squeezes. But how do you know what the market position is? And should you care?
Let’s start with the first. You should definitely care.
Let’s imagine the entire market is exceptionally long EURUSD and positioning reaches extreme levels. This makes EURUSD very vulnerable.
To keep the price going higher EURUSD needs to attract fresh buy orders. If everyone is already long and has no room to add, what can incentivise people to keep buying? The news flow might be good. They may believe EURUSD goes higher. But they have already bought and have their maximum position on.
On the flip side, if there’s an unexpected event and EURUSD gaps lower you will have the entire market trying to exit the position at the same time. Like a herd of cows running through a single doorway. Messy.
We are going to look at this in more detail in a later chapter, where we discuss ‘carry’ trades. For now this TRYJPY chart might provide some idea of what a rush to the exits of a crowded position looks like.

A carry trade position clear-out in action
Knowing if the market is currently at extreme levels of long or short can therefore be helpful.
The CFTC makes available a weekly report, which details the overall positions of speculative traders “Non Commercial Traders” in some of the major futures products. This includes futures tied to deliverable FX pairs such as EURUSD as well as products such as gold. The report is called “CFTC Commitments of Traders” ("COT").
This is a great benchmark. It is far more representative of the overall market than the proprietary ones offered by retail brokers as it covers a far larger cross-section of the institutional market.
Generally market participants will not pay a lot of attention to commercial hedgers, which are also detailed in the report. This data is worth tracking but these folks are simply hedging real-world transactions rather than speculating so their activity is far less revealing and far more noisy.
You can find the data online for free and download it directly here.

Raw format is kinda hard to work with

However, many websites will chart this for you free of charge and you may find it more convenient to look at it that way. Just google “CFTC positioning charts”.

But you can easily get visualisations
You can visually spot extreme positioning. It is extremely powerful.
Bear in mind the reports come out Friday afternoon US time and the report is a snapshot up to the prior Tuesday. That means it is a lagged report - by the time it is released it is a few days out of date. For longer term trades where you hold positions for weeks this is of course still pretty helpful information.
As well as the absolute level (is the speculative market net long or short) you can also use this to pick up on changes in positioning.
For example if bad news comes out how much does the net short increase? If good news comes out, the market may remain net short but how much did they buy back?
A lot of traders ask themselves “Does the market have this trade on?” The positioning data is a good method for answering this. It provides a good finger on the pulse of the wider market sentiment and activity.
For example you might say: “There was lots of noise about the good employment numbers in the US. However, there wasn’t actually a lot of position change on the back of it. Maybe everyone who wants to buy already has. What would happen now if bad news came out?”
In general traders will be wary of entering a crowded position because it will be hard to attract additional buyers or sellers and there could be an aggressive exit.
If you want to enter a trade that is showing extreme levels of positioning you must think carefully about this dynamic.

Bet correlation

Retail traders often drastically underestimate how correlated their bets are.
Through bitter experience, I have learned that a mistake in position correlation is the root of some of the most serious problems in trading. If you have eight highly correlated positions, then you are really trading one position that is eight times as large.
Bruce Kovner of hedge fund, Caxton Associates
For example, if you are trading a bunch of pairs against the USD you will end up with a simply huge USD exposure. A single USD-trigger can ruin all your bets. Your ideal scenario — and it isn’t always possible — would be to have a highly diversified portfolio of bets that do not move in tandem.
Look at this chart. Inverted USD index (DXY) is green. AUDUSD is orange. EURUSD is blue.

Chart from TradingView
So the whole thing is just one big USD trade! If you are long AUDUSD, long EURUSD, and short DXY you have three anti USD bets that are all likely to work or fail together.
The more diversified your portfolio of bets are, the more risk you can take on each.
There’s a really good video, explaining the benefits of diversification from Ray Dalio.
A systematic fund with access to an investable universe of 10,000 instruments has more opportunity to make a better risk-adjusted return than a trader who only focuses on three symbols. Diversification really is the closest thing to a free lunch in finance.
But let’s be pragmatic and realistic. Human retail traders don’t have capacity to run even one hundred bets at a time. More realistic would be an average of 2-3 trades on simultaneously. So what can be done?
For example:
  • You might diversify across time horizons by having a mix of short-term and long-term trades.
  • You might diversify across asset classes - trading some FX but also crypto and equities.
  • You might diversify your trade generation approach so you are not relying on the same indicators or drivers on each trade.
  • You might diversify your exposure to the market regime by having some trades that assume a trend will continue (momentum) and some that assume we will be range-bound (carry).
And so on. Basically you want to scan your portfolio of trades and make sure you are not putting all your eggs in one basket. If some trades underperform others will perform - assuming the bets are not correlated - and that way you can ensure your overall portfolio takes less risk per unit of return.
The key thing is to start thinking about a portfolio of bets and what each new trade offers to your existing portfolio of risk. Will it diversify or amplify a current exposure?

Crap trades, timeouts and monthly limits

One common mistake is to get bored and restless and put on crap trades. This just means trades in which you have low conviction.
It is perfectly fine not to trade. If you feel like you do not understand the market at a particular point, simply choose not to trade.
Flat is a position.
Do not waste your bullets on rubbish trades. Only enter a trade when you have carefully considered it from all angles and feel good about the risk. This will make it far easier to hold onto the trade if it moves against you at any point. You actually believe in it.
Equally, you need to set monthly limits. A standard limit might be a 10% account balance stop per month. At that point you close all your positions immediately and stop trading till next month.

Be strict with yourself and walk away
Let’s assume you started the year with $100k and made 5% in January so enter Feb with $105k balance. Your stop is therefore 10% of $105k or $10.5k . If your account balance dips to $94.5k ($105k-$10.5k) then you stop yourself out and don’t resume trading till March the first.
Having monthly calendar breaks is nice for another reason. Say you made a load of money in January. You don’t want to start February feeling you are up 5% or it is too tempting to avoid trading all month and protect the existing win. Each month and each year should feel like a clean slate and an independent period.
Everyone has trading slumps. It is perfectly normal. It will definitely happen to you at some stage. The trick is to take a break and refocus. Conserve your capital by not trading a lot whilst you are on a losing streak. This period will be much harder for you emotionally and you’ll end up making suboptimal decisions. An enforced break will help you see the bigger picture.
Put in place a process before you start trading and then it’ll be easy to follow and will feel much less emotional. Remember: the market doesn’t care if you win or lose, it is nothing personal.
When your head has cooled and you feel calm you return the next month and begin the task of building back your account balance.

That's a wrap on risk management

Thanks for taking time to read this three-part chapter on risk management. I hope you enjoyed it. Do comment in the replies if you have any questions or feedback.
Remember: the most important part of trading is not making money. It is not losing money. Always start with that principle. I hope these three notes have provided some food for thought on how you might approach risk management and are of practical use to you when trading. Avoiding mistakes is not a sexy tagline but it is an effective and reliable way to improve results.
Next up I will be writing about an exciting topic I think many traders should look at rather differently: news trading. Please follow on here to receive notifications and the broad outline is below.
News Trading Part I
  • Introduction
  • Why use the economic calendar
  • Reading the economic calendar
  • Knowing what's priced in
  • Surveys
  • Interest rates
  • First order thinking vs second order thinking
News Trading Part II
  • Preparing for quantitative and qualitative releases
  • Data surprise index
  • Using recent events to predict future reactions
  • Buy the rumour, sell the fact
  • The mysterious 'position trim' effect
  • Reversals
  • Some key FX releases
***

Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
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Learn to read and use the COT Report by the Commodity ... Video Response: CFTC Proposed FOREX Leverage Change CFTC COT Report: Forex Weekly Report August 24, 2020 - USD ... CFTC COT Report: Forex Weekly Report September 21, 2020 ... How to use C.O.T. reports to improve your Forex Trading ...

A Brief Look At The Operating Standards Of CFTC Forex Brokers. CFTC, or the Commodities and Futures Trading Commission, is an independent agency of the United States Government that is responsible for monitoring and regulating the many futures as well as options contracts in the US financial markets. The CFTC works as an independent regulatory agency tasked with the supervision and regulation of American companies dealing in the futures, SWAP’s, commodities, and Forex trading. The Commodity Futures Trading Commission filed charges against 10 defendants in a multi-level $4.75 million forex Ponzi scheme. The CFTC charged based in Florida Avinash Singh with soliciting and misappropriating funds through a master commodity pool Highrise Advantage, LLC. Forex.com is the first to feature as one of our top CFTC brokers. This broker is well known throughout the industry and licensed and regulated by both the CFTC and NFA under license number 0339826. Here you will find three distinct account types. CFTC Forex Brokers For Safe US Trading. The Commodities & Futures Trading Commission (CFTC) is one of the highly respected independent regulatory organizations that have a critically acclaimed regulatory framework for ensuring a fair and transparent marketplace for commodities, futures, and options trading.

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Learn to read and use the COT Report by the Commodity ...

Today we discuss what the Commitment of Trader (COT) reports are and how we can use them with our forex trading. Reports found here: https://www.cftc.gov/Mar... Analyze the commodity markets with the CFTC's Commitments of Traders Report. Find out how to determine if a commodity futures market is overbought, or overso... Forex CFTC COT Report Review 31st Dec In this video, you will see a complete CFTC COT Data analysis for all forex majors. EURUSD AUDUSD GBPUSD NZDUSD USDCAD USDCHF USDJPY The Forex Weekly Report:... Send emamils to [email protected] You MUST INCLUDE 'Regulation of Retail Forex' in the subject of the email and reference RIN 3038-AC61 in the body of the message. Category Education

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