The short and pleasant answer to this question is yes! You are 100% able to trade Forex in the USA, like everywhere else.
But it's good that you decided to figure it out, because Forex trading in the US is not like Europe and other parts of the world.
First, the rules in the United States are completely different, and this has led to the fact that many foreign brokers simply did not allow American traders who use them.
For this reason, many people like you are not sure what the legal situation is when trading Forex in the USA.
In this article, we'll take a look at why Forex trading in the US is so different from the rest of the world and what you should be prepared for when you start trading Forex in the US.
Why you should consider a US broker
While stock trading is generally more popular in the US, did you know that forex trading is actually cheaper for traders?
This is true! Forex requires much less start-up money than stocks and you can more accurately specify the amounts you want to trade.
In addition, brokers often charge higher commissions for trading stocks than forex. Again, this fact makes forex trading the best way to start trading.
Many traders are beginning to understand this, and today US traders are the second largest nationality of forex traders in the world after the UK, and 88% of all forex trades are tied to the US dollar.
In addition, the New York Stock Exchange plays a huge role in Forex trading. Especially when the opening hours coincide with the opening hours of the London Stock Exchange.
The regulation of US Forex trading is often viewed as very strict and can be seen as a hindrance, but that does not make US Forex trading impossible!
Forex trading is regulated by the NFA (National Futures Association) and the CFTC (Commodity Futures Trading Commission).
All US brokers must be part of the NFA and the CFTC is responsible for enforcing the rules.
The fines for brokers who break the rules can be quite high. The NFA can fine brokers up to $ 2 million if they break the rules.
But the NFA and CTFC have nothing to do with the regulation of the forex market. Not a single financial regulator in the world does this, the forex market is completely unregulated and uncontrolled.
The NFA and CTFC can only influence companies that have services related to Forex trading, such as brokers.
The regulation of trade in the foreign exchange market and other types of trade in the United States is largely motivated by the idea of preventing a new financial crisis like the one that occurred in 2008.
Its purpose is to prevent the big risks of forex traders and brokers. That is why the penalty for breaking these rules is so huge.
American traders should consider themselves lucky that there are strict rules to encourage brokers not to break the law.
If they do, they could face severe fines and get into a world of trouble.
There are two main reasons for this.
First rule; it is common knowledge that regulation in the United States is difficult. For example, this is too much unnecessary effort for European brokers. If a European broker obtains a license, for example in Germany, he can offer his services to people in all other EU countries - Ireland, France, Italy, Spain, etc.
The second rule is; To obtain a license in Europe, a broker needs to have at least $ 500,000, while in the US, a broker needs $ 20 million. This is a serious risk that most foreign brokers do not want to take! Or that they simply cannot afford it.
For these two reasons, many brokers in Europe and other parts of the world do not accept US traders because. It is too difficult and risky. As such, it is generally recommended that US traders stick with US based brokers who are better equipped to deal with them.
Some of the best overseas brokers take on American traders, but through different branches of their business, or create a completely new company that repeats them, but observes US laws and is based in the US.
Even if you move from the US, you may still have trouble finding a broker who will accept you, because you are not a US citizen and you may even need to obtain a residence permit in that country to start trading Forex. ...
Trade with a US broker
US traders should ideally seek out CTFC and NFA regulators if they want to stay safe. If you don't see that they are regulated when you browse the broker's website, that should be a serious wake-up call.
If you are using a broker that is not regulated in the US by the NFA or CFTC, you may not be protected.
For example, if a broker goes bankrupt or is liquidated, it may not be able to protect you or compensate you for the damage. And if this happens, you can lose everything that you put in the account.
And whatever you do, don't forget to get your taxes in order! The US has a 60/40 rule.
This means that 60% of your income can be charged up to 15%, and 40% of your income can be charged up to 35%.
If you are caught evading taxes in the United States, you will face many unnecessary problems that could end your forex trading career.
American traders are not allowed to implement certain forex trading strategies. For example, hedging is not allowed.
Hedging is when you take two positions in opposite directions as a backup if your trade fails. Forex traders often do this to reduce losses.
But American traders cannot do this because of the first-in-first-out rule, which prevents traders from opening multiple positions on the same currency pair at a time.
When registering with a US broker, be sure to check their policies and frequently asked questions to find out what they allow and what they don't.
It's also worth noting that this leverage for US traders is different from other parts of the world. The maximum leverage in the US is 1:50 for major pairs and 1:20 for all other currency pairs.
Leverage in the EU used to be much higher, but today the EU is even stricter: up to 1:30 for major currencies and 1:20 for all other pairs.
Outside the US and Europe, some brokers allow traders to leverage up to 1: 3000.