As I prepare for the vacation, I have done a great deal of thinking. My bots’ shouldn’t make me worry like this. What can I do to reduce my risk? With almost all bots set at bare minimum risk, I started asking questions about my Fed account. What made me think this was a candidate?
- Despite any theories to the contrary, the Fed account is the only account at 1:200 leverage. (All of the rest are at 1:300)
- The Fed and Gold Digger share an account. Would I benefit if Gold Digger were in an independent account?
- Since the Fed and Gold Digger share an account, volatility in gold could put all of the money in that account at risk. While the Gold Digger knows how to navigate out of most problems, it is a risk.
My next step was to email Ox Securities. What would I need to do to raise the leverage in this account? What leverages apply to different ranges of account sizes? Could I transfer money out of the Fed account to get the leverage raised? I received this response:
“The agreed maximum leverage for FEDBot/Pelosi users is 1:200
The reason this only applies to NURP clients is because the trading strategy takes the same trades across many accounts and in the same direction. What this means is that effectively, these trades become one large position with significant exposure to market movements. In contrast, traders trading different strategies will typically have positions in both directions netting off exposure.
I also wanted to take the time and explain how this leverage change impacts margin and the importance of it.
In the institutional world, it’s actually hard to access leverage higher than 100:1. So having access to 200:1 leverage is still considered on the high side and requires an active risk management plan. It is also worth noting that liquidity providers do not provide such high leverage, which means that brokers are extending higher leverage to clients than is actually available.
To better illustrate this, we can use this example. Say you have a 100,000 USD account on 200:1 leverage which is utilizing 20,000 USD in margin. This would equate to approximately 40 lots of open orders (4,000,000 USD), which is a very large exposure for such an account size and can be categorized as high-risk trading.
The equity in the account would need to fall to 4,000 USD to trigger a margin stop-out, which is where the system will start closing trades as required in order to free up margin.
If the same account was on 500:1 leverage, the margin usage would be 8,000 USD and the stop-out will first happen at 1,600 USD equity.”
Basically, Ox Securities knows I use the Fed. As long as I am using the Fed, the best leverage I am getting is 1:200. I don’t love the answer, but it gives me something to chew on while on vacation.
