Best Forex Brokers In USA 2020
Forex Market in united states of America is the biggest one. But many people still want to know about the US forex market. Do you want to know about the rules for forex brokers in USA? Best Forex Brokers in USA? How to Work with the forex Brokers In USA? What are the qualities of Forex Brokers in USA? This article might help you.
Is Forex Trading Legal In the USA?
Yes, Forex is legal in the United States. The foreign exchange market is not organized by any governing body. Members trade with each other on credit agreements.
A trader from the US can trade FX online easily like persons living in other countries. There are thousands of brokers and investors are working in the US forex market.
Trend of FX trading in the USA
US residents are always keen to invest money in some business. Thousands of people are investing and trading in the Forex market. There is an estimate of 50 million traders in the current Forex market and many forex brokers in USA.
Can US residents trade with overseas brokers?
No, US residents cannot trade to any broker overseas. However, a US nationality holder, if living in another country can trade with the broker of his residing country.
But for US residents it is illegal.
Forex Brokers USA
Currently many brokers of the forex market are working in the USA. But the rules of trading and the restrictions of the regulatory organizations made it challenging to work in the Forex market. Because of this reason many international companies do not accept clients from the United States of America. In some offshore countries the local authorities haven’t executed such limitations.
Regulation of Brokers in the USA
In 2008, America faced a financial crisis. US government introduced new laws. These laws were extremely strict about the regulation of the broker.
Forex brokers in USA are regulated by the National Futures Association (NFA). NFA’s is responsible for the registration, settlement, and compliance. It battles with all kinds of scams in the futures markets through its authorities.
The Commodity Futures Trading Commission (CFTC) of the USA formed in 1974. It has to regulate the U.S. derivatives markets, which includes futures, swaps. Forex brokers in USA are the members of CFTC.
NFA and CFTC Rules
NFA and CFTC has set some rules and regulations that are required to follow by the US Forex brokers.
Forex brokers in the US must be a member of the CFTC. US brokers must be regulated under the NFA guidelines.
Financial statements and audit reports should be submitted to the NFA for tracking of all transactions.
The NFA supervises all activities to ensure that the broker conforms to the NFA and CFTC regulatory guidelines.
FX Trading Rules
CFTC imposed rules to FX trading such
- No hedging.
- FIFO (First In First Out) rules
- No CFDs trading
- maximum leverage of 1:50
Heavy Fine on manipulation
If a broker found playing with trading platforms and price feeds, NFA has the authority to charge heavy fines for manipulation of the markets.
Limitation on deposit to the overseas broker
It is illegal for US traders to deposit money to any international broker through any kind of electronic means. The deposition of money to any international broker will be considered as money laundering. So US brokers should act on the anti-money laundering laws.
Separated accounts for client fund
Client funds must be kept in isolated accounts to ensure that the broker does not have access to their trader’s funds for the broker’s operating expenses.
Withdrawals should be made quickly. The broker is not allowed to keep or hold any kind of payments until they get verified by some Federal Authority.
If brokers have any pending legal or bankruptcy, they should have a detailed and proper procedure to deal with.
USA Forex brokers should hold at least $20 million in functioning capital, which increases as the number of client accounts and their trading capital increases.
All brokers working in the USA should have the best kind of customer service.
Institutionalization of market
traders in the FX market was institutionalized as these rules were directed at “unsophisticated’ traders with assets that are lower than $10million, as well as small businesses But professional and commercial traders (investment banks) were largely exempted from these changes.
Requirments of Forex trading in USA
Before you invest in the US market, you should know about how to get registered yourself for trading.
- You have to provide your personal information like name, email, date of birth, address.
- Age must be 18 or more.
- Residency of USA is compulsory.
- For trading in the forex market, you have to provide your social security number
- You have to show your business or employment status.
- If you are an employee then your salary, job description, position are concerned.
- Your source of income, assets, and net worth will be asked.
And you will be asked about some basics of the forex market.
US forex market is one of the most flexible markets in the world. However everything has a bright side as well as the dark side.
Bright-Side of US Market
Let’s go through the advantages of working with the US brokers.
US Forex market is highly flexible and liquid. It includes a massive number of traders. Due to the high flexibility of the market; there is a low risk of manipulation and loss.
There are very strict rules for the regulation of a brokerage house. For these firm rules, it is difficult you may fall a victim to a scam.
Low Costs of Brokers
The best thing about US Forex trading is that it has very low costs, brokerage and commissions. Brokers earn profits from the spreads between forex currencies. So while working with the US forex market you do not need to worry about separate brokerage charges, withdrawal cost, and hidden charges.
Variety of Assets to play
In the US Forex market, you have a large variety of assets to play with. There are almost 28 currency pairs. You can trade in any pairs you want to deal with.
Forex Market provides a vast range of assets. Unlike other financial markets you can invest a little amount to start trading. For example you can start forex trading with only 10 dollars. Some brokers provide the services of trading with even less than 10 dollars which proves very useful for the beginners.
Due to the high volatility and flexibility of the US forex market, you can earn big profits. It only requires some research and analysis to trade. A group of wisely placed trades makes you rich.
Dark-Side of US Forex Market
Before Trading in the US Forex Market, have a look on the dark side to get awareness.
As the forex market is highly volatile. SO you need to be very careful about your trades. A mistake in your trade can give you a big loss because of the high volatile market. Brokers in USA often fail due to their consecutive blunders while trading.
You always need a teacher to which you can seek assistance. There is no one to guide you properly. You have to do everything on your own.
Difficult to Analyze
Forex Market is very difficult to research and analyze. Unlike other financial markets like stocks and commodities, it is quite tough to predict the next moment. Its movement is generally based on technical indicators. And to understand these indicators you need a proper education.
Due to the strict rules of the regulatory bodies of the USA, brokers in the US try to make their commissions despite being concerned about the loss of his client. This a major drawback while working with the US brokers.
High leverages make the forex market more challenging and risky. The Dodd-Frank Act finalized maximum leverage of 50:1 for major currency pairs. For minors and exotics, it is 20:1.
Prohibition of Risk Management tools
Hedging is a risk management tool. It means you can average your trade by buying on one and short sell on one side. In this way you can control your risk by making one trade profitable. This profits average your net amount. But the US market does not allow it. FIFO is another risk increasing rule by US forex market. It means “First In First Out”.
How to choose a Broker in the USA?
Choosing a broker in the US is not as easy as we think. US brokers lack transparency. To choose a forex broker in the United States of America focus on some crucial points given below.
Regulation with CTFC and NFA is necessary. NFA allocates a unique number by which you can check the legality of the broker.
Choose the best of trading platforms. Like MetaTrader 4. Make sure the trading platform must be user friendly.
Variety of Assets
Choose the broker who has a vast range of assets, like stocks, commodities, and incides.
An American payment will be the best one for you. USA forex brokers accept debit cards and even via PayPal.
Always choose brokers who offer attractive spreads on USD currency pairs.
Best Forex Brokers in the USA
The best Forex Brokers of the USA according to the ranking of 2020 are;
- CMC Markets
- TD Ameritrade FX
- City Index
If you want to work with a US broker or want to know about the US forex market, visit our website that contains great researches on the forex trading of different countries. To avoid a scam or wants to get the fruit of your investment in forex trading, contact us. We will find you the best broker in your country.