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As many of you already know Forex trading is the trading of foreign currencies based on expectations of how currency exchange rates will change. If the chosen currency rises relatively to some other currency, this represents a profit. However, if you sell the currency which ascends in value you have made a poor judgement and you will suffer a loss.
The Forex market is very liquid, it is global and in practice it is very difficult to regulate. This is because in addition to individual investors also known as retail customers the Forex market is also used by large investment banks, insurance companies and financial institutions.
They use the market to manage the risks of currency exchange rates fluctuations. The risks to small individual investors and traders in a large and unregulated market are enormous. For example, unregulated Forex brokers often use the allure of high leverage to make themselves attractive to individual investors with low initial investments and capital.
They promise huge profits by using only your small initial investment. However, as many Forex traders know, this is a dangerous strategy and it can lead to big losses just as easily.
High leverage increases your profits in the same way it increases your losses. A small trader should always look to use only his own funds. He should only put at risk what he can afford to lose.
High leverage may seem attractive, but it can be the death of a small investor. Fortunately for retail customers, there are regulatory agencies around the world which regulate big international markets and try to protect traders. These governmental, sometimes federal and sometimes private institutions make sure that the risk of fraud and misinformation is minimized or completely eradicated.
There is no one specific central agency to regulate the Forex market. However, most developed countries have clear rules and laws regarding Forex trading and Forex brokers. In an attempt to explain legal US Forex trading we will list the answers to the ten most frequently asked questions on the topic.
If you are a US citizen you will have no other option, but to trade with a regulated Forex broker so you might think that going through the register might not be worthwhile.
However, checking the information about each broker might be invaluable when making the decision which Forex operator to choose. For example, in the period between and , 26 thousand people were the victims of illegal activity and fraud. The US Forex market is one of the most highly regulated markets in the world.
This makes the market safe for investors and unattractive for fraudulent brokers. The CFTC is a governmental agency, independent from other bodies, which governs over and oversees all Forex transactions conducted through regulated Forex brokers which operate in the United States. Its main objectives are maintaining the integrity of markets within the USA and protecting traders and investors from being involved in a scam or a fraud.
Some of the key regulations include:. These regulations differ quite a lot from other countries where markets are less regulated. In fact, since the Forex market has started being regulated in the US, a lot of Forex brokers looking for quick profit have left the US and moved to countries with more lenient laws. This further strengthens the notion that the US Forex market is one of the safest for small investors and businesses.
Best Legal US Forex Brokers and Trading Platforms As many of you already know Forex trading is the trading of foreign currencies based on expectations of how currency exchange rates will change. What is the lowest possible initial trading capital that US Forex brokers require?
Forex brokers which are regulated in the US offer many different types of accounts depending on the type of user you are. All these account types come with different initial trading capital requirements. Which financial control rules should regulated US Forex brokers adhere to? They are also subjected to regular and comprehensive audits every year and are also obliged to report their account balances to the NFA every week. How do US based brokers differ from Forex brokers based in other countries when it comes to financial regulations?
US Forex brokers are probably the safest brokers to trade with because they are subjected to a lot of strict checkups and inspections. They are also expected to meet some of the highest standards set by a regulating agency. Can non-US brokers accept US citizens as clients? However, if you live in the US and you are not a US citizen you will have no problem accessing any Forex broker you choose.
What are the payment options that US based Forex brokers offer to customers? Can I be involved in a broker scam with a US based broker? If a broker gets involved in fraudulent transactions then his license will immediately be revoked and enormous penalties will have to be paid which makes any fraudulent behaviour not worthwhile for the broker.
How can I avoid getting involved in a broker scam? This one is very easy. In it you can see the main information about the regulated brokers. Are banks, insurance companies and financial instructions regulated in the same way as individual traders? US Forex brokers offer the possibility of trading with virtual money for the purpose of learning how to trade without losing your deposits.
If you are new to Forex trading most regulated US Forex brokers will offer you the chance to open a demo account and start trading. What are some other positives of trading with a regulated Forex broker? It means that the broker has been operating conscientiously for a number of years. It also means that the trader will be due a certain compensation should the broker becomes insolvent or is liquidated. Finally, a registered and regulated broker is a guarantee that no fraudulent behaviour will occur.
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