Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.

Forex in USA: Myth or Reality?

Author: Martin Moni
Martin Moni
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The concept of Forex in the USA is like an oasis in the desert, everyone seems to have heard something, but only a few know what it really is. As you might have noticed yourself, a lot of Forex brokers don’t provide their services to the US citizens. But why? What is the United States guilty of, and is there Forex at all? In this article, we’ll have a look at this issue and try to clarify all aspects relating to online trading in the United States. (All the: Laws and limits of forex trading in the US)

Let's delve into history. Just a decade ago, in 2008, the United States faced the financial crisis, that alarmed the country’s officials and made them urgently reconsider the existing regulation and create a new financial regulation, which contained a number of tough restrictions to protect the public and people’s money from a sudden market collapse. In 2010, the US Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was a massive financial overhaul in response to the financial crisis. As a result, ordinary traders were surprised to discover unpleasant changes in trading rules -  that is almost all operations in the financial market became illegal. (These are the: Best US regulated Forex brokers)

Last year a scandal broke out in the United States when FXCM, a large brokerage company was banned from the country for betting against its customers in trades. The American Forex regulators accused the company of market manipulation and reporting false data. According to the official statement of the Securities and Exchange Commission (SEC), FXCM engaged in misrepresenting that its “No Dealing Desk” platform had no conflicts of interest with its customers. As a result, a large company with a well-recognized brand had to leave the United States and permanently relocate to London. (Can A Forex Broker Avoid Sending Trades Directly To The Interbank Market?)

The Dodd-Frank Act has imposed too many restrictions and eventually forced many other Forex brokerage companies who weren’t registered with CFTC to leave the United States. Many forex trading operations became legally impossible, which put a stop to online-trading in America. With Donald Trump’s presidency, the American traders saw the light at the end of the tunnel, but these are just ghostly expectations of a softer regulation. So far, the US residents are not accepted by most of the forex brokers. (Some of: What to watch for during the Trump presidency)

However, there is a way to bypass these restrictions. If you are a US citizen, living outside the US and choosing a Forex broker, you can try to convince your broker that you are eligible to trade. But if the broker refuses to provide its services, don’t blame the brokerage company - it simply can’t work against the CFTC regulation. If, however, you’re just a US resident with a citizenship of a Forex-friendly country, but you plan to move from the States, your selection of trading opportunities is enormous. In addition to changing your country of residence, you can always choose to change your previous broker to AMarkets, which by the way offers an exclusive 25% Change your broker trading bonus. As for the US citizens and residents, AMarkets, like most brokerage companies, cannot provide its services to these categories of clients. (Revealing Forex Bonuses Of Brokers: How To Identify A Real Bonus)

One may assume, that Forex situation in the United States is very bad. Nevertheless, there’s still Forex trading in the United States, but the traders live by entirely different rules:

  1. they all have to comply with the FIFO policy (First In, First Out – a trader is required to close the oldest trades first in the case where there are several open trades on the same pair and of the same size)
  2. hedging and locking are banned
  3. maximum leverage is very small - 1:50, average leverage size - 1:5
  4. CFD trading is not allowed
  5. high minimum deposit –  $10 000

Traders from other countries jokingly say that American traders are the most protected traders. Although, we should all understand that using leverage doesn’t mean staying in debt. Brokerage companies, which value their reputation and their clients, have been successfully using Stop Out (involuntarily close of unprofitable positions) for a very long time now. AMarkets, for instance, also uses negative balance protection on all its accounts. (Learn: How to protect yourself from margin call)

To conclude, if you like trading in financial markets, it would be wise for you to put off applying for the US citizenship and trade from a country that allows brokers and traders to do their job.

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Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.
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