As of Monday, 29 March 2021, Australian CFD traders will be faced with higher margins on most CFD trades, due to an ASIC order from October of 2020. The bottom line for traders is that, unless you qualify as a ‘professional’, you will have to settle for smaller position sizes on your accounts, as margins on markets like currencies move from 0.5%, which allowed a $100,000 position to be traded on $500 margin, to 3.33%, which means the same $100,000 position will now require $3,333 in margin.

While this won’t affect everyone, it will affect some people, and I have had a number of emails about this over the last few months. My opinion on the matter is that “it is what it is”. Ultimately, the majority of private traders lose money, and a big reason that they lose money is that they overtrade, to the point where just a few losses can wipe out their account. While these new margin levels can’t stop people from losing money, it will stop them from over-leveraging, essentially meaning that it will take far longer for an account to be wiped. As someone who knows what it is like to wipe out a trading account (I wiped out my first trading account, $30,000, in 2 days of trading in 2005), I see this as a positive. It should reduce losses for many traders, giving them more time in the market to learn the ropes and grow as traders.

However, some traders I have spoken to are fearful that this may mean it will take them longer to reach their trading ‘endgame’, where they can trade for a living and replace their income. David Bowden used to say “don’t wish that it was easier, wish that you were better’ and while the ASIC order may seem like it has made things more difficult, the good news is that there is light at the end of the tunnel in the form of trades with a higher Reward to Risk Ratio (RRR).