Hello traders, how are you?
If you are a Forex trader residing in the US than this article is going to be of vital importance.
No BUY/HOLD and/or SELL recommendations!
Beginning today, Monday October 18th 2010 major CFTC regulations will go into effect and they will impact all US traders. Specifically all US traders will have to trade with US brokers. The way that this is going to be enforced is that Forex brokers all over the world are going to be prohibited from taking on US traders according to international law.
Because of certain trading restrictions in the US, many US Forex brokers previously set up branches oversees for their US customers.
With the new rules in place US brokers will have to repatriate all US traders back to their US branches by October 18th. Many traders are extremely disappointed about this. However, before jumping to conclusions it's important
o understand all the restriction and see if they will actually have any
negative effect on your trading.
It is important to keep in mind that the NFA and the CFTC is there to protect US
traders and there is valid reason for all of the rule changes that are being
implemented. Giving up certain trading conditions is a far lesser evil than
losing all of your hard earned money because of fraud.
So let's look at each roadblock individually and determine if you will be
affected:
Leverage - The maximum leverage that US Forex brokers will be able to offer is
50:1 on the majors and 20:1 on the exotics. Traders rarely leverage out their FX
account more than 12:1 and when they do its usually right before they lose all
their money. So unless you have a specific strategy that requires very quick
trades with high leverage the leverage decrease is only a benefit.
Hedging - Hedging allows traders to go long and short on the same pair at the
same time. Unless you have a specific trading robot that requires this, hedging
is really no different than simply exiting your position and then re-entering it
when necessary. Therefore check with your system vendor if you really need
hedging capabilities, most of the time you will not. If you are using multiple
strategies on the same account you may want to consider opening up a separate
account for each strategy where you can toggle between them on your MT4
platform.
FIFO - With the new FIFO rule you will be required to close out your positions
in the same order as you opened them. Hence the name FIFO (First In First Out).
If you really think about it you are in on your position at the average price
anyways so it really doesn't matter what portion of your position you get out of
first since your bottom line will be affected the same. Once again, the only
time that you will be affected is if your specific EA requires position based
order management. So check with your EA vendor, however in our experience most EA's don't.
Most off shore brokerages will abide to the international rules and not take on US clients anymore. However some will ignore them. The question is do you really feel safe keeping your hard earned money at a broker that is simply ignoring international rules? We didn't think so.
So now you will need to make sure that you are setting up your account with a US regulated firm.
Regards,
Efraim
Risk Disclosure: NFA (National Future Association)
Trading Spot/OTC Foreign currencies involves substantial risk and
there is always the potential for loss. Your trading results may
vary. Because the risk factor is high in Forex exchange market
trading, only genuine "risk" funds should be used in such trading. If
you do not have the extra capital that you can afford to lose, you
should not trade in the Foreign exchange markets. You must be aware
of the risks and be willing to accept them in order to invest in
the Forex markets. No "safe" trading system has ever been devised,
and no one can guarantee profits or freedom from loss. Unique
experiences and past performances do not guarantee future results!
Nothing in our live presentations, training courses, website, or other
materials shall be
deemed a solicitation or an offer to Buy/Sell currencies in Spot/OTC
Forex Markets. No representation is being made that any account will
or is likely to achieve profits or losses similar to those discussed
or presented in any manner. Also, the past performance of any trading
methodology is not necessarily indicative of futures results. Foreign
currencies trading involves high risks and you can lose a lot of
money.
CFTC RULE 4.41: (CFTC = Commodities Futures Trading Commission)
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN
LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS
DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT
BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE
IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY.
SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO
THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO
REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO
ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN OR DISCUSSED HERE, TRAINING
MATERIAL, PROMOTIONAL MATERIAL OR ANY RELATED SERVICES. OUR COURSES, PRODUCTS
AND SERVICES SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE USED TO
INVEST REAL MONEY. IF
YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR
OWN AND ARE SOLELY AT YOUR OWN RISK.
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