The number of online forex brokers offering platforms for trading has proliferated over the years, but only a few of them are offering service to US citizens. If you live in the US and are looking to choose a trusted US forex broker to work with, then you have only limited options available to you because of the strict regulatory control enforced by the authorities.
You need to take into account a number of factors when choosing a US forex broker, but the most important aspect is regulation. This is because regulation is helpful in ensuring that the forex broker you are planning to work with is adequately capitalized, keeps your hard earned money in secure as well as segregated accounts and follows fair dealing practices so that your orders are executed at the quoted market prices. It is, therefore, strongly recommended that you choose a regulated broker so that you can benefit from these protections.
Forex Regulation in the US
In the US, forex brokers are subjected to very stringent standards by the regulatory authorities. Operation of forex brokers in the country is overseen by two bodies: the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). These agencies often pursue legal action against those brokers that solicit US citizens as clients without any proper registration.
Till 2008, mainstream forex brokers from around the world were allowed to service US citizens without any regulatory control. However, the regulatory reforms enforced by the NFA and CFTC following the financial crisis, has set limits on the freedom that international forex brokers have been enjoying. Currently, only those forex brokers that are regulated by the NFA (https://www.nfa.futures.org/) and registered with the CFTC (http://www.cftc.gov) can operate in the country.
Here are some of the key stipulations that US forex brokers have to comply with:
Forex brokers in the US are required to hold $20 million of operating capital. This would increase based on the number of clients and the trading capital employed by them. Regulatory capital requirement was raised to $20 million following the global financial crisis.
regulated forex brokers in USA cannot offer a leverage of more than 50:1 on major currency pairs and more than 20:1 on minor currency pairs.
Funds of clients are to be kept in separate accounts so that the brokers do not use these funds to meet their operating expenses.
Additionally, regulation prevents US forex brokers from accepting deposits through credit cards.
CFTC enforces limitations to forex trading like no CFD trading, First In First Out rules and no hedging.
NFA regulated brokers are also required to conform to rigorous reporting and record-keeping standards.
All withdrawals have to be paid at the earliest. The broker cannot delay payments on any flimsy terms, unless it is warranted by a Federal authority.
Forex brokers operating in the US are not allowed to tamper with the price feeds and the trading platforms offered by them. If a broker violates this rule, the NFA will slap heavy penalties on them on manipulation charges.
All forex brokers in the US are also required to have a detailed procedure in place for dealing with insolvency issues like bankruptcy, lawsuits and other liquidation processes.
Having discussed the regulation aspects in detail, some of the other things you should check out when choosing a US forex broker. If the brokers under consideration are offering the following features as well as benefits, then you can move on to the next level of doing a background check on these brokers in order to ensure that have the best trading experience after opening a trading account with one of them.
#1: Banking Option in US Dollar
If you are US resident wanting to trade currencies through online forex broker platforms, then this is probably the second aspect you should be checking out. The forex broker should allow you to not only make deposits, but also trade and withdraw funds from your trading account in US Dollars. Additionally, the broker should also be offering a method that is convenient for you to transfer funds and receive payments.
#2: Fast and On-Time Payouts
Prior to deciding to open a forex trading account with any one of the US forex brokers that you have shortlisted, you should ensure that the broker makes payments quickly and in a timely fashion.
You should always look for online forex brokers that offer different kinds of bonuses that are reasonable. It is always better to stay away from those that promise a lot of things, but often they do not deliver and may even be scams. Bonuses will help you to lock in additional value and thereby maximize profits. This is an important aspect if you want to succeed as a forex broker.
#4: Multiple Trading Opportunities
Make sure when choosing the best forex broker in America, that the company does not restrict you in placing multiple orders at a time. You need to keep in mind the fact that some forex brokers offer only a limited range of varied trading opportunities and currency pairs. It is better that you avoid working with such forex brokers.
#5: Types of Online Trading Platforms
Top Forex brokers offer a variety of different trading platforms to their clients. However, you should make sure that the US forex broker you are planning to choose provides some of the most popular trading platforms listed below:
MetaTrader 4 Trading Platform: This is one of the most popular trading platforms among forex traders. This is because it comes with a great deal of configurable options. Most brokers offer this platform because most often this may be the only one you will ever need to use.
Mobile Trading Platform: Ensure that the forex broker of your choice offers mobile trading platforms. This is important because this convenience will come in handy if you are a person who travels a lot. You can access your account from anywhere in the world.
Social Trading Platform: Many forex brokers are now offering Social Trading Platforms. This type of a platform enables you to interact with some of the best forex traders and get trading tips and hints as well. You can even replicate the trades being placed by successful traders. This feature enables you to quickly succeed in forex trading.
Finally, open a demo account with a couple of the US forex brokers you have shortlisted so that you can have a clear idea as regards the customer service they provide. Then, you can choose the best US forex broker to work with.