FOREX prohibiting US Residents from OTC Metal Trades

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Thu, Jun 23, 2011 - 4:52am Torpedo Fish
Citizen Doctor
Joined: Jun 15, 2011


I talked to their help desk yesterday and they had no news in the aftermath of the announcement. When the email announcement about ending leverage in PMs came out later in the day, I checked back in to see if only US citizens were affected -- would they allow non-residents to continue using leverage with PMs? I moved to Europe with my European wife a few years ago to escape the controlled demolition of the US.

They said that last week (approximately) they had begun setting up a European division and would soon send instructions for migrating accounts to the new division. My wife's account certainly qualifies. I don't know yet if a US resident or even a US citizen living abroad can do this legally. If so, I'll migrate my own account too.

Thu, Jun 23, 2011 - 11:34am
Joined: Jun 14, 2011

Some dark aspect of forex trading which wasn't well discussed

After I took the time to think through and read Ted’ Butler’s comment, I conclude that this banning of leveraged PM bets on forex account might be a blessing disguised as a curse to most retail investors except some top pros. I will tell you the lesson I learned the usual hard way, which I hope to be of some help to the newcomers in avoiding that costly mistake I made.

Let me start with the cases I observed with my Oanda account when bid/ask becomes ridiculously:

-----at normal trading hours bid/ask for an oz of silver is 3-4c. But at opening of Sunday night session, bid/ask is around 10-20c.

-----Around FOMC minute on April 27th, PM was surging and bid/ask was around 50c/oz. There is no justification to this except broker’ benefit of preventing us from going long without paying hefty fee when PM looks most promising (at least for short term).

-----I actively traded around 1AM Apr 25th when silver surged to $50. At that time, price rocketed up, and I kept adding 500oz each time. Around 1AM my position built in couple of hours was up more than 10k, and price suddenly turned around at one point. While I was pressing the close buttons immediately after turn around, my profit was down by 5k. Why that much? Because bid/ask was almost $1/oz!

-----Due to high bid/ask spread around 6pm Sunday night, I was almost forced to keep some silver position before May 1st massacre and got hit.

----Because of its nature of running 24 hours, it will hit your stop or margin call whenever there is spike down. On May1st massacre, price hit $42 and your spot position would be closed at that level while SLV was less affected as silver was back up to $47 by Monday morning. Because of this nature, high leveraged position will destroy your account at huge down spike or flash crash.

So when market moves up/down dramatically and you really need to close your position, bid/ask moves completely again you. Unless you are top pro, emotionally it will force you to keep the position and drives you more toward emotionally panic stage. Do you think silver run up/down as in April/May is once in a life time event? Guess what. Around April 2006, there was a day when silver fell 17%. It will repeat more and more.

Even during normal trading hours silver’ bid/ask spread is 3-4c which is three to four times higher than other currency pair. Considering the higher volatility of silver, 1-50 leverage in silver is perhaps equivalent to 1-500 in other currency pair. It is a game for top pro.

Given all this aspect the chance your survival in trading silver with fx account is perhaps lower than wining lottery considering that only 10% or less can survive in the pits(according to market wizard). I honestly think it is much better for most people to spend the money in physicals, or they are better off flushing the money down the toilet as they can at least avoid the pain and avoid accumulation of gambling habit.

Only reason why you want to try is perhaps to develop your trading skill at the cost of all your capital.

In this regards, lowering margin to 1-1 by Oanda it is really blessing to new comers who can still develop trading skill with 1-1 leverage as it forces you to trade lower volume. Even if I am allowed to trade at higher leverage, I would still trade much smaller size as most top pro says that 99% of traders overtrade. Also, if Oanda contnues that ridiculous bid/ask spread even at 1-1 leverage, I will completely stop trading forex account there.

Good luck and here is a link to Ed Steer to read more about this by Ted Butler.

Fri, Jun 24, 2011 - 2:41pm
Dark Side of the Moon, WA
Joined: Jun 16, 2011

Well, it won't stop you from

Well, it won't stop you from buy most physical silver and gold. reported on line that “As a result of the Dodd-Frank Act enacted by U.S. Congress, a new regulation prohibiting U.S. residents from trading over the counter precious metals, including gold and silver, will go into effect on Friday, July 15, 2011.”

The report is not exactly accurate when it comes to gold, silver or platinum purchases in small or non-regulated sizes (such as 1 ounce bars, U.S. Mint bullion coins in any quantity, or any contract that is not approved by the Commodity Futures Trading Commission), and just plain wrong if the metals (or coins containing them) do not have their delivery deferred.

Notice the comment about "U.S. Mint bullion coins in any quantity"

Wed, Jul 13, 2011 - 12:13pm Citizen Doctor
Citizen Doctor
Joined: Jun 15, 2011

OANDA Europe

Citizen Doctor wrote:
They said that last week (approximately) they had begun setting up a European division and would soon send instructions for migrating accounts to the new division.

Just a follow up. OANDA did indeed pull off setting up a European Division based in the UK before July 15. I migrated my account from the US Division today, just in time to catch the breakout in the PM's with leverage. I noticed that only US and Canadian residents are not allowed to register. Glad I moved out of the US.

Wed, Jul 13, 2011 - 4:09pm
Professor Fisty
Joined: Jun 14, 2011


Received this from Oanda today:

Unfortunately since you are living in U.S., you can only maintain an account with our U.S. division, you are not able to migrate the account to other divisions due to the U.S. regulations.

However, some clients who are qualified for Eligible Contract Participant (ECP) or Eligible Contract Participant (ECP) can still trade gold and silver on a leveraged basis without migrating to other division. Please be patient, we are in the middle of setting up the procedure and will send e-mails out to such clients. You are welcome to contact us if you don't hear from us within 2 weeks.

Please let us know if you have any further questions.

From the list here, there are two offshore options for metals: FOREX FS (Australia) and Forex Metal (Panama). The former does both XAG and XAU, while the latter has only XAU. FOREX FS also offers 100:1 leverage.

Wed, Jul 13, 2011 - 4:36pm
Joined: Jun 21, 2011

That this means is small

All that this means is small speculators will be changing into accumulators. (physical)

Thu, Jul 14, 2011 - 7:45am
Ernie Pantusso
Joined: Jul 14, 2011

cftc limiting liquidity?

As I understand it, following a cftc decision, FOREX will prohibit US Residents from OTC Metal Trades.

This will limit liquidity.

Some cftc commissioners, i.e. Scott D O'Malia and Jill E. Sommers, have refused for months to implement position limits in the futures markets with the excuse it would limit liquidity. Is there a contradiction?