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Top U.S.-Regulated Forex Brokers.

Started by Indonesia, Apr 09, 2020, 09:51 am

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Top U.S.-Regulated Forex Brokers.
The foreign exchange (Forex) market runs 24/7, offers global currency pairs for trading. The market is driven by geopolitical developments, news, the release of macro-economic data, and related developments. On one hand, such a global market offers enormous trading opportunities, but on the other, it is challenging to protect individual traders from any financial irregularities. Thus, regulations were introduced through an established framework that ensures that financial intermediaries, like Forex brokers, comply with the necessary rules to offer loss protection and controlled risk exposure to individual traders.
Learn more about the basics of Forex market regulation in the U.S., as well as some of the popular Forex brokers in the country.
Key Takeaways.
The Commodity Futures Trading Commission and the National Futures Association are responsible for regulating the Forex market in the U.S. All U.S. Forex brokers must be registered with the NFA. The Dodd-Frank Act, which was signed into law in 2010, constitutes the primary body of rules governing Forex trading. Some of the most popular Forex brokers include Forex.com, OANDA, TD Ameritrade, ATC BROKERS, thinkorswim, Interactive Brokers, and Ally Invest.
U.S. Forex Market Regulation.
There are two institutions responsible for regulating the Forex market in the United States--the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA).
Every Forex broker operating in the U.S. must register with the CFTC. The laws enforced by the CFTC and NFA apply to both U.S.-based Forex brokers, as well as any other Forex broker who intends to serve clients in the country.


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All U.S. Forex brokers (including the introducing brokers) must be registered with the National Futures Association (NFA), the self-regulating governing body that provides the regulatory framework to ensure transparency, integrity, abiding of regulatory responsibilities, and protection of various market participants. The NFA also offers an online verification system called Background Affiliation Status Information Center (BASIC), where Forex brokerage firms can be verified for having necessary regulatory compliance and approval.
One point to note is that the Securities Exchange Commission (SEC) does not have authority over the Forex market because it doesn't consider currency pairs a security.
Daily trading volume has reached as high as $4 trillion in the Forex market.
Dodd-Frank Act: Forex Rules.
In the United States, the Dodd-Frank Act constitutes the primary body of rules governing Forex trading. Signed into law in 2010 by President Obama, it reformed insufficient financial regulation that allowed too much leeway to financial institutions, which contributed to causing the 2007-2008 financial crisis.
These regulations have scared off both Forex brokers and retail traders. There are fewer Forex brokers currently operating in the U.S. compared to other areas in the world--primarily because of the regulations enforced by the NFA.


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U.S.-Regulated Forex Brokers.
This list of seven U.S.-regulated Forex brokers--that remain after Dodd-Frank washout--is not in any particular order, and it is not comprehensive:
Forex.com.
Owned by NYSE-listed parent company, GAIN Capital Holdings, Inc. (GCAP), Forex.com offers many salient features like tight Forex spreads, timely trade executions, a mobile trading platform, and numerous technical research indicators in 29 different languages.
Forex.com trading offers integration across MetaTrader 4 or FOREXTrader PRO platforms. There are three ways traders can trade--advanced trading, web trading and mobile trading applications.
High volume traders get cash rebates, earned interest, and bank fees waived.


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OANDA.
OANDA is another popular broker offering competitive spreads with no commissions and deep market liquidity, along with its OANDA Marketplace. It offers loads of features for Forex traders such as Forex tools, products, advanced analytical tools, Forex news, training videos, and MetaTrader plugins from OANDA and associated partners.
You can start with a free demo. The site also offers benefits for high volume traders. You can get a discounted spread, a subscription with a partner platform, free wire transfer among other perks.
TD Ameritrade.
TD Ameritrade offers powerful charting tools, capable of comparing multiple currency pairs alongside each other, as well as providing any necessary technical indicators. Customers can also analyze social sentiment from Twitter. The brokerage also provides reputable third-party research tools from Morningstar and Market Edge.
The firm promises no hidden fees, access to its mobile trading app, and 24/7 support.
Verify a Forex broker's status by using its NFA ID or firm name through the NFA's Background Affiliation Status Information Center.


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ATC BROKERS.
STP Execution, No Dealing Desk, Scalping Allowed, Multiple Brackets Order along with other risk management tools like breakeven capability, custom trailing stop-loss, and more enable ATC BROKERS to be one of the popular regulated brokers in the U.S.
The broker also provides access to news events and an economic calendar, along with support through email, phone, and online chat.
thinkorswim.
thinkorswim by TD Ameritrade is another popular U.S.-regulated Forex broker that offers to trade in more than 100 global currency pairs.
You can sync the platform on multiple devices and customize and share your alerts. You can also get in-app chat and sharing, so if you need help, the representative you're communicating with can access your screen. And like TD Ameritrade, it promises no hidden fees, and data fees also don't apply.
Interactive Brokers.
Another popular broker having a global presence, Interactive Brokers claims to have low trading costs with high-level execution, global offerings, high-end trading technology, risk management tools, and trading tutorials.
It promises access to 23 different currencies, as well as 120 different markets in 31 different countries. You can stay connected to global markets 24 hours a day, six days a week.


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Ally Invest.
Ally provides traders with comprehensive research and analysis, competitive pricing and robust educational resources. The trading platform includes a full suite of trading tools, 24/5 market access and a practice account for testing investing approaches.
The Bottom Line.
Regulations are a balancing act. Too little will lead to financial irregularities and inadequate protection to individual traders; too much will lead to a lack of competitiveness in global markets. One major challenge reported with U.S. Forex regulators is that leverage provided is limited to 50:1, while global brokers, outside of U.S. regulations purview, provide up to 1000:1 leverage. Traders and investors need to take a cautious approach, ensuring security first.
Disclaimer: Information presented is as available at the time of writing this article, and may change in due course of time. The author does not hold an account with any of the mentioned brokers.


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Best Forex Broker in the US.
With so much at stake, it's imperative that you zero in on the right broker. Benzinga has done your Forex homework for you, so breathe easy and check out a few of our suggestions.
Shanthi Rexaline.
Contributor, Benzinga.
The #1 Forex Broker in the US.
The #1 Forex Broker in the US.
If you fret about the volatility and risk associated with stocks, then Forex trading is likely not your cup of tea. There are a plethora of risks involved, including leverage, transaction, country and interest rate risks, to name a few.
Quick look: Our Favorite Forex Brokers.
Best Overall: Forex.com - Open an account Best for low costs: Forex.com - Open an account Best for beginners: Forex.com - Open an account Best for platform & research tools: TD Ameritrade - Open an account Best for advanced traders: Interactive Brokers - Open an account Best currency pairs offered: Forex.com - Open an account.
The choice becomes further complicated for two reasons:
There are hundreds of brokers who offer a multitude of platforms for trading currencies. There are no hard-and-fast rules for Forex trading.


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Contents [ Hide ]
What is Forex trading?
Forex trading is a global, decentralized, over-the-counter market for trading global currencies. The market participants in a Forex market include traders, investors, governments, banks, businesses, etc. The market is open 24 hours, five days a week .
Although there is no physical marketplace for the Forex markets, important world trading centers for currencies are located in Sydney, Tokyo, Hong Kong, Singapore, Frankfurt, Zurich, Paris, London and New York. It can be confusing; this video breaks down Forex opening and closing times around the world.
Forex quotes are offered by central banks and what our broker quotes is the average of all the quotes received from the banks. Essentially, the broker acts as a market maker and sells the currency pair to you and not another trader.
Characteristics of the Forex Market.
High liquidity , with roughly $3 trillion worth of transactions handled each day, allowing easy entry and exit. That said, the Forex market is not regulated and therefore, lacks transparency. The number of currency pairs traded is limited, making research and asset picking easy . This is unlike the equity market, where a plethora of stocks are trading. The currency market allows anywhere, anytime trading . High volatility associated with the currency market offers sizeable profitable trading opportunities. On the contrary, high volatility also exposes one to high risk. Geopolitical and macroeconomic factors drive Forex. The tight spread in terms of pips facilitates trading even with low capital.
Understanding the Risks Involved in Forex Trading.
Conventional wisdom states that high returns are always associated with high risks. There is no dearth of risks in the Forex market. Here is brief on a few major risks one should be wary of while trading currency pairs.


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1. Exchange Rate Risk.
Exchange rate risk or currency risk arises when an investor needs to close out a long or short position at a loss due to adverse movement in the exchange rate of the currency pair they are trading.
2. Risk Associated with Leverage Trading.
Once an investor decides to take a plunge in the Forex market, he does by opening a margin account in a brokerage, which provides him with leverage or loan for trading.
The leverage provided could be in the ratio of 50:1, 100:1 or 200:1 depending on several factors. A 50:1 leverage means the trader has to maintain at least $1 for every $50 worth of trade he makes. This is substantially higher than the 2:1 leverage allowed in stock trading and 15:1 for futures trading.
This exposes a Forex trader to enormous leverage risk if his bet goes wrong . When his position loses value to the extent of him not meeting the margin requirement, the broker will begin to liquidate his assets just so that the account complies with the margin requirement.
3. Volatility Risk.
Volatility refers to the change in the value of the currency pair held as an investment, annualized and expressed as a percentage. The volatility associated with a currency pair also poses a risk to currency traders.
4. Interest Rate Risk.
With the direct relation interest rates share with the value of a nation's currency, the prevalent benchmark interest rates or a change thereof can introduce risk in currency trading.
5. Sovereign Risk.
Sovereign risk refers to a nation failing to meet its interest payments or principal repayments , which in turn can impact the value of the nation's currency. Devaluation of a nation's currency also creates sovereign risk.
6. Counter-party Risk.
Since the currency market is not regulated in both the trading and clearing, a Forex trader may be exposed to counterparty risk, which arises if the Forex broker defaults or does not keep up his end of the bargain.
If this happens, a currency trader will be straddled with huge losses. The best way to go about trading safely in the Forex market is to choose well-regulated brokers.
It is best to do a background check on the agency under whose regulatory jurisdiction the broker falls. Forex trading is regulated by bodies such as the Commodity Futures Trading Commission, or CFTC, which regulates leveraged trading offered to retail traders.
The CFTC requires that all online Forex dealers be registered and meet strict financial standards enforced by the National Futures Association, or NFA.
Our Picks for the Best Forex Brokers in the United States.
After carefully considering prices, platform, fees, and the number of currency pairs offered, we made our picks for the best Forex brokers. Scroll down for our picks and click on the full reviews for more information.