- 1 Forex trading regulations in the US
- 2 Forex regulatory bodies of USA
- 3 Forex trading in the US – Ways to get started
- 4 Top Forex Brokers in USA – Trading platforms
- 5 Forex Brokers in US 2021 – Mobile trading
- 6 Final Thoughts on Forex trading in the United States
- 7 Frequently Asked Questions on US Forex brokers
The United States of America represents the biggest player in the financial industry. The Forex trading market here is very popular and the national currency of the country, USD, is the most traded currency throughout the global market.
Forex trading in the United States is legal and accessible for American traders. Most importantly, the local regulatory bodies guarantee the safety of local Forex traders.
There are many requirements that the country has for Forex brokers. First and foremost, only the companies that are authorized by the National Futures Association, simply known as NFA, are able to accept clients from the US.
American Forex market is very diverse and there is a lot that goes into it. So, if you are looking for ways to start trading in the US, follow our guide and find the best Forex brokers accepting US clients.
Forex trading regulations in the US
As of today, there are many scam companies in the market, and trading with them can cause a lot of problems. To avoid being scammed while trading Forex, one thing that could potentially help you is to trade with regulated Forex brokers in USA.
There are two major US Forex regulators:
- The Commodity Futures Trading Commission, CFTC
- National Futures Association, NFA
Thanks to these two regulatory agencies, Forex trading in the country is certainly very safe and secure. But what exactly are these two bodies doing to achieve such a safe environment?
First of all, NFA makes sure that no Forex broker is allowed to provide services to American traders without a local license. By doing so, the regulatory body ensures that only the companies that went through very strict checking and application procedures are able to accept clients.
But being licensed by NFA is not enough. Local laws also require Forex brokers to be registered with CFTC. This applies to both local Forex brokers and international, offshore companies that intend to serve American traders.
In order to operate in the Forex trading market, Forex brokers in the USA have to register as Retail Foreign Exchange Dealers by CFTC. Then, they will need to be registered as the Futures Commission Merchant by NFA. We will talk more about the registration process below.
Forex regulatory bodies of USA
The Commodity Futures Trading Commission, simply known as CFTC is a federal regulatory agency. It was established by Congress in 1974 and it has control over the commodity futures markets.
Before the establishment of the CFTC, the financial market of the country was regulated by the Securities Exchange Commission, SEC. However, because the financial market was developing very fast, the regulatory framework of the SEC was not enough. Therefore, Congress had to create a new body that would maintain the stability of the market.
The financial market kept growing, and the US regulated Forex brokers had to face more restrictions. Soon after CFTC’s establishment, it became obvious that another regulatory body was necessary to monitor Forex trading in the country.
As a result, the National Futures Association was established in 1982. This self-regulatory organization focuses on many markets, including Forex. All Forex brokers are obligated to become members of both of these agencies. As of today, NFA has more than 4,000 firms, and more than 55,000 associates registered.
Restrictions & requirements
CFTC and NFA have worked very hard and they have created regulatory frameworks aimed at keeping the trading market safe for all participants. Currently, Forex brokers are restricted to offer leverage higher than 1:50 for major currency pairs. For minor currency pairs, the maximum leverage is 1:20.
The main reason for this restriction is to limit the risks that traders face while trading. However, the US is not the only place where leverage restrictions are in place. The same goes for EU member countries. Recently, the same restrictions were adopted in Australia as well.
But this is not the only rule USA regulated Forex brokers have to follow. Under the local Forex trading laws, Forex brokers in the country also have to maintain a minimum capital of $20 million, which is a huge number.
For comparison, the same requirement in the UK is $100,000, while in Cyprus, New Zealand, and many other countries, it is just around $50,000.
Also, if you want to compare US Forex brokers and the local trading market to other countries, it should also be noted that the licensing period could last up to two years in the USA, while in other countries, it could take only a few months.
Another requirement for Forex traders is to keep their clients’ funds on segregated bank accounts. This is a very important one. Thanks to this, even if your Forex broker goes bankrupt, you will be able to freely access your funds and withdraw them.
In 2010, the Obama administration adopted a new act that aimed to make the market safer. Although it was initially followed by some backlash from investors, it proved to be very successful in maintaining the market transparency and safety.
All Forex brokers accepting US traders are required to follow the rules under the Dodd-Frank act. The 20 million capital requirement that we have talked about earlier is a result of this act as well.
The act gives the Commodity Futures Trading Commission much broader authority in the Forex trading market. The Dodd-Frank act is considered to be one of the most significant laws enacted during the presidency of Barack Obama.
Many studies have shown that the Dodd-Frank Act played a huge role in improving stability and consumer protection in the financial markets, including Forex trading.
Restriction on CFDs trading
Contracts of Differences offer traders the ability to trade certain assets without having to own them directly. It can be done by speculating on price changes. Trading CFDs is banned for citizens of the United States. They are illegal because CFDs are an over-the-counter product, which does not pass through the regulated exchanges.
How to find regulated Forex brokers in the USA?
Sometimes, beginners are having a very hard time finding regulated Forex brokers. To make sure that you are trading with a legit Forex broker, visit the official website of the regulatory bodies and check the status of the license of the broker.
There have been many cases of scam companies falsely claiming to be authorized by regulatory bodies. This has led to a number of problems over the last few years. Now, both of the regulatory bodies offer detailed information about the companies they have licensed.
Forex trading in the US – Ways to get started
Finding the Best US Forex brokers in 2021 can be a very challenging thing. It is especially hard for beginners because they don’t know what to focus on while looking for a Forex broker.
Once you have found a regulated Forex broker that you can trust, now it is time to focus on other details. For many traders, especially those using day trading strategy, Forex is like a regular job.
If you are one of those, you will know the importance of the quality of services that a broker offers. Trading platforms in Forex trading is among the most important things. They are something that will give you access to the trading market.
Top Forex Brokers in USA – Trading platforms
There are many trading platforms in the market, but the most used one in the country is MetaTrader 4. In fact, more than 90 percent of all Forex brokers worldwide offer traders MT4.
This Forex trading platform was created exactly 15 years ago, in 2005 by a Russian company called MetaQuotes. Thanks to MT4’s user-friendly interface and easy-to-use tools, trading Forex becomes a lot easier for everyone in the market. Even the beginners in the market are getting used to it very easily.
For US Forex brokers MT4 trading platform is very common. For the reasons we have talked about earlier, it is no surprise that there are so many people who enjoy using this trading platform.
But MT4 is not the only one you can use. MetaQuotes also released a newer version of MT4, which is called MetaTrader 5. Although MT5 is a newer version, MT4 still stays to be more popular in the market. That said, US Forex brokers’ MT5 offerings are still enjoyed by many traders.
Forex Brokers in US 2021 – Mobile trading
Recently, a lot of Forex brokers started offering mobile trading. Mostly, it is done with the help of mobile trading applications that brokers are offering for both Android and iOS users.
Mobile trading has become a very active part of Forex in recent years. Now, people can trade Forex even when they are on the go. This is especially true for those who are traveling a lot and want to always stay in touch with the Forex trading market.
Most popular payment methods in the US
When you are trading Forex, you will have to deposit funds on your trading account. There are many ways you could do that, especially in the US. Most popular payment methods in Forex trading include:
- Bank Transfers
- Credit/Debit Cards
- Digital Wallets
Bank transfers are mostly used by Forex traders who want to deposit a lot of money in one go. This payment method, in most cases, costs the most. However, many people still use it because of the safety that it offers.
In the USA, Credit/Debit cards are used very actively. Forex trading is no stranger to cards. You can use anything from Visa, MasterCard, American Express, and many other cards issued in the country.
But if you want to make your payments in the most time-efficient way, digit wallets might be the best choice for you. Some of the best Forex brokers in the USA offer traders to make deposits using Skrill, PayPal, Neteller, and many other online payment methods.
USD in Forex trading
The United States dollar is the national currency of the country. It stands to be one of the most important currencies in the Forex trading market for several reasons. First of all, USD is known as the most traded currency in the market.
USD is the most dominant reserve currency around the world. Also known as “greenback”, the currency has the status of a ‘safe-haven’ asset, because the price of it is more likely to rise during times of uncertainty.
Many US Forex trading brokers have noted that it mostly happens because when the risks are high, traders often decide to buy US Treasuries. This creates a huge demand for the US dollar, resulting in the price of it increasing.
In fact, the currency pair of EUR/USD has the largest global trading volume. This means that this pair is the most traded one in the market. The Central Bank’s 2016 study showed that USD was the world’s most traded currency, while Euro claimed the second spot. According to official data, the daily share of USD in the Forex trading market is as much as 87.6%.
Influence of USD in Forex trading market
It should not come as a surprise that the national currency of the biggest economy has an influence on the Forex trading market. As we have already said, USD is the most traded currency in Forex.
Because of this, the influence on the changes in the Forex market is largely dependent on the state of USD. We have seen how the price of the national currency of the US has changed the market.
Take the US elections, for example. Even the presidential debates in the country affect the market worldwide. One of the major reasons for it is that the US plays a huge role in the political and economic stability of other countries. The decisions made by the President of the country could change a lot of things in many countries.
It is not only the currency trading market that is influenced by the US. The prices of shares of leading companies are also dependent on the ongoing events in America. Because of this, Forex traders are advised to keep an eye on the changes in the US before they start trading. Especially if they are trading USD pairs.
How to trade Forex in the USA?
The list of Brokers for US traders is huge. There are hundreds of companies that are registered in the country, offering American trading services. This means that US traders have a lot of opportunities to choose from.
Although this is a very good thing, many beginners are very confused when they are looking for Forex brokers. Since there are so many US accepted Forex brokers beginners are having a hard time deciding which broker to use.
As we have already said, focusing on regulations and authorization is something that can help a lot. Traders in the country are advised by the regulatory body representatives to never trust offshore companies that are not registered in the country.
This seems like something that would be very logical, but newcomers are many times blinded by the amazing offerings that these offshore companies have. This is why there are so many people who are getting scammed every day.
Keep in mind that if something seems to be too good to be true, it most probably is. The regulatory bodies of the US have special websites where you can check out the status of Forex brokers. If you see that the broker is not registered locally, you are advised to not use it.
The economy of the United States
The reason why Forex brokers in the USA are thriving is the economy of the country. According to the official data of the International Monetary Fund, the GDP of the US constitutes 24% of the gross world product. The economy of the country is the biggest in the world, because of this, it stands to be one of the best places for Forex trading.
For many decades now, the USA has been a leader in technological innovation. It should not come as a surprise that the USA plays a huge role in the Forex trading market. Even the tiniest changes in the country have a huge influence on the state of many financial markets and industries, Forex trading is one of them.
Official data shows that Americans collectively possess as much as 29% of the world’s total wealth, which is the largest number for any country.
Final Thoughts on Forex trading in the United States
Forex trading is very popular in America. The country is one of the safest and most secure places for Forex trading. However, there are many people who are skeptical about the regulatory framework of the US.
With that being said, it is one of the major reasons why there is a huge US Forex brokers list that stands among the leading companies in the market. Thanks to the steps the country has taken, the Forex market is very safe for American traders.
The USA also has a huge influence on the state of the Forex market around the world. Because of this and many other reasons, it stands to be one of the best places for Forex trading.