Why are people here so obsessed not having access to leverages anymore?? Do you even understand that leverages are setup by these brokerages to benefit themselves more than they benefit their clients?
First of all, if you are a professional trader you wouldn’t even think of using leverages in a trade until it’s absolutely necessary. You think all the prop traders, hedge funds, investment banks that trade and make up more than 60% volume in India use leverage over some candle stick non sense and indicators? Obviously not! They use their own money most of the times. They literally laugh at when they see some retail traders using 1:10 leverages on trades that are setup to fail. When you trade with leverage, you are basically providing liquidity to these guys.
Moreover, if you compare this leverage with Forex, you get 1:100 times leverage. That’s fucking insane! that means for Rs 1 lakh you are being leveraged to Rs 1 Crore. That’s insane! Let’s use some common sense - Do you really think these companies will give a completely random stranger who has just started trading with no experience an outrageous leverage of 1:100 who are setup to fail more than 90% of the time? Of course not, unless they own the system. They have setup the system in a way that their revenue is revolved around you failing and blowing out your money. These brokerage companies spend around 25%-30% of their revenue on marketing to new clients. Now you must be thinking if 90% retail traders fail then that means a loss of potential revenue, isn’t it? Absolutely not! Their business model is completely different, like I said, they have created a model where they make more money when you lose than you win in trades.
These brokerages have setup contracts often called ‘IB’(Introducing Brokerages) contracts that basically give commission to these trading institutes that teach retail traders how to trade, more like, how to blowup your account… This is exactly the reason, why trading institutes teach you some indicator non-sense and candlesticks to basically rip you off. (Just look at Technical Analysis courses on Varsity) These contracts have been getting banned in many big market countries. A simple google search will reveal you all. In fact, the IB contract is so dominant in these companies that brokerages end up losing 80% of their caps when they get banned.
You need to understand the brokerage system has been setup to ensure that you fail. About 90% of retail traders fail but that number is quite false, it is actually higher but they don’t reveal that to conceal the negative light of trading. SEBI’s decision to cut off leverage is a big slap to the brokerages and we should appreciate the SEBI’s decision they have taken to protect the interests of the common people these brokerages are exploiting. This decision might put the brokerage industry decades back but I feel that’s a worthy sacrifice to ensure the common people don’t suffer.
A bit funny thing is that brokers do exactly like they sound - They make people broke XD.
You still don’t understand? Well then, think for yourself. In a market where 90% of your customers end up losing money and most of them end up blowing account, do you really think that market is worth catering to unless you have found a way to take advantage of that?
UPDATE: A lot of people here are making some senseless claims like, ‘A good trader can benefit using leverages’. ‘Leverages are good and advantageous’. the points I made are neither saying leverages are good nor it is saying leverages are bad. My main aim of the post was to shine a light on the practices that are being used to exploit people to make money off them. Yes, leverages are good when you know what you’re doing, but is this really the case? Just what percentage of people qualify in this market as ‘Good’ Traders? More than 90% of retail traders lose money in the market, do you understand the kind of impact it is having over those poor people coming here looking to make money with the hopes of improving their lifestyle they’re never gonna get?