There are quite a lot of ways of making money online nowadays and Forex trading is among them. As a matter of fact, a lot of people will actually claim that it’s the best once, considering the high returns you can generate, with minimum investment. But this is a story we’ll cover another time.
After studying the market for a while, one thing can be observed: forex trading has already turned into a household name in many Asian countries, especially in the Southeast region.
Forex is also doing very well in Europe, as many countries already have big trader communities, while Africa, as previously reported, registered a boom lately. This leads us to one important question: what happens in the United States? How come forex trading isn’t so popular here?
The explanation is relatively simple: only a few brokers have clients from the United States. And this happens for a few reasons we’re going to discuss in detail.
Way too strict regulation of brokers
With various departments and agencies in charge of implementing rules made to protect its citizens, there’s no wonder that the United States has specific agencies looking after the country’s financial system as well.
When it comes to forex trading, there’s the National Futures Association, but also the Commodity Futures Trading Commission, both of them regulating the activity of Forex brokers, but also of other global forex brands accepting US-based traders.
The main reason behind these regulations is because in the past it was one of the most popular ways for scammers to take advantage of vulnerable investors. This pushed the NFA and CFTC to implement stricter rules for any Forex company wanting to enter the US market!
The license fees are expensive
As mentioned above, multiple organizations in the United States are constantly trying to protect investors from potential scams. That’s why they want to make sure that any Forex broker entering the market has enough capital to maintain its business.
Specifically, brokers are required by the Financial Conduct Authority to haven at least $1 million operating capital, while the NFA requires $20 million locked capital. As you can guess, for newly-established brokers, these numbers are almost impossible to achieve, thus their difficulties in entering the market in the United States.
Trading strategies are restricted
Technically speaking, the maximum leverage a forex trader can use in the US for ‘working’ with major currency pairs is 1:50. However, this is way below the usual maximum leverage brokers in other areas offer, which can go as high as 1:1000.
With this kind of leverage, a trader can control way bigger funds, trade large volumes and, of course, obtain bigger profits. On the other hand, just 1:50 can drive a lot of clients away, especially those with limited capital, as they will eventually be able to trade just low volumes.
So yes, the United States can make it difficult for forex brands to be present here and remain constant, but this doesn’t mean that it’s impossible. Still, we believe that it will be long until we will see a solid presence!