August 2, 2020

Forex in the USA: Reality or Myth?

The concept of “forex in the USA” is like a mirage in the desert, everyone seems to have heard something, but very few people know what really is there. Undoubtedly many of you have seen a mention on the pages of forex brokers that cooperation with US citizens is impossible. What is the fault of the States, and is there any forex there at all? We tried to understand the problem and clarify all aspects of online trading in the United States.

Let’s plunge into history. Just an era ago, in 2008, the United States experienced a financial crisis that scared the country’s leadership so much that it was decided to urgently raise the issue of new regulation of the financial system with a number of severe restrictions that, like armor, could protect private capital from a sudden collapse market—no sooner said than done. In 2010, the States passed the Dodd-Frank Act to Reform Wall Street and Protect Consumers. And then ordinary traders are surprised to discover that the trading rules have changed unpleasantly. To be more precise, almost all operations in the financial market were outlawed.

Last year, a big story happened in the United States – a large brokerage company was expelled from the country. We are talking about the FXCM currency broker. The American regulator accused the company of market manipulation and incorrect reporting data. In the official message of the Securities and Exchange Commission (CFTC), it was said that FXCM provided access to trading in currency pairs and played unfair play against its own clients, having entered into a conflict of interest with them. After that, a large company with a well-recognized brand had to leave the States and permanently move to London without the right to return.

The Dodd-Frank Act eventually forced not only the FXCM broker to leave the United States. Many Forex trading operations have been found to be illegal. Of course, all of this negatively affected online trading in the financial markets. The vast majority of brokerage companies that were not registered in the United States left the country. With the coming to power of Donald Trump, by the way, a “light at the end of the tunnel” dawned for American traders, but so far, these are just ghostly expectations of a softening of the law and nothing more.

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Currently, all traders with American citizenship, alas, will be disappointed. Nevertheless, there are some alternatives to get around the restrictions. For example, if you are a US citizen, but are outside the US, you can try to prove to your broker that you can trade. But if this venture does not succeed, do not blame the broker; he simply has no trick against the CFTC.

However, it is possible that Americans sleep and see how they move to a more Forex-friendly country and start trading without problems. By the way, the “Trade Bonus for the Switch” promotion is still available at the broker AMarkets. If the trading conditions attract you that it offers, you will receive an exclusive 25% trading bonus. But, alas, AMarkets does not cooperate with US residents in the same way as most brokerage companies.

You might think that the situation with forex trading in the United States is completely sad, but there are certainly traders in the United States, only they live by different rules.

Judge for yourself:

  • They obey the FIFO rule (First In, First Out), according to this rule, it is necessary to close old positions first and then newer ones.
  • Positions cannot be hedged. Locking is prohibited. – The leverage is not high; the maximum is 1:50, on average, to be honest, 1: 5.
  • CFD trading is also prohibited.
  • The minimum deposits are quite high – from $10,000.

Traders from other countries jokingly say that no one is safer than American traders. However, here it should be remembered that the use of leverage does not lead to debt. Brokers who respect their reputation and their clients have long been successfully running Stop Out, which compulsorily closes unprofitable positions. For example, the broker AMarkets has this option on all offered accounts.

In conclusion, we add that if you like to trade in the financial market, then, for now, it is better to postpone US citizenship and try to trade from a country that allows brokers and traders to do their job.

About the author 

Peter Hatch

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