If you’re a U.S. citizen interested in forex trading, you may be spending a lot of time trying to find a good broker. There are many options out there, so the decision may be hard to make. But can you opt for foreign brokers?
Although you’d think a U.S. citizen would want to settle for a U.S. forex broker, there are also people who want to take advantage of offshore alternatives. Can you go with foreign brokers, though? Let’s find out.
Can U.S. Citizens Go with Foreign Brokers?
The laws for trading forex with foreign brokers may be a bit confusing, especially if you’re just getting started with forex. So, you may not know for sure whether you’ll be allowed to trade forex overseas as an American citizen.
Well, you can trade forex on foreign brokers if you want, as it is not illegal. But what is illegal is for the foreign broker to open the account, to begin with.
To put it simply, if a foreign broker solicits or provides a trading account to someone from the United States, it would go against the law. The person from the U.S. that opened the account will not have to worry about any legal trouble, though.
When it comes to forex regulations overseas, U.S. laws are very strict. One of the regulatory bodies that oversee forex trading in the States, respectively the NFA, clearly states on their website that:
- any other off-exchange options and futures transactions done with retail customers from the U.S. are against the law unless they are done on or subject to a regulated exchange’s rules.
Can You Find Any Foreign Broker that Accepts U.S. Forex Traders?
Since the regulation for offshore brokers is so strict, you may be wondering if there are any brokers overseas willing to accept U.S. clients.
The truth is that some foreign brokers will always try to go against the law and support people from the U.S. Although nothing stops you from choosing them if you want to, going with such a forex broker for U.S. clients can be risky.
Some brokers can be shut down or go out of business. If there is no regulation, the chances of you recovering your money are slim. Not to mention that if you have any complaints about the broker, it’s highly unlikely that you will receive help due to the lack of regulation.
Furthermore, some withdrawals and funds may either be returned or blocked. This is all due to the U.S. law regarding overseas brokers.
Should You Take the Risk?
Even if it’s tempting to go with a foreign broker, you should not trade with one. The risks are too big and not worth the reward. It can all turn out to be worse for you if you have any complaints or if you want to recover your money following the broker being shut down.
Sticking to U.S. brokers is the best option for U.S. clients. While you will not be penalized if you open an account with an offshore broker, it sure is risky and thus not advised.