Is Forex Trading Legal In US? (How To Trade Legally)


You have probably heard at some point about something like insider trading or watched Wolf Of Wallstreet or some other movie that has shed a bad light into the investing and trading world. Well I am here to tell you that not all is as it seems and is basically what you make of it. If you are looking to get into trading part or full time you are definitely looking in the right market to get started.

Is Forex Legal

Is Forex Trading Legal and is it legal in the US? Yes it is legal. There is no insider trading going on as it takes so much money to manipulate forex in the least because of how big of a market it is. Many times bigger then Stocks and Bonds. It is legal to trade in the U.S. you just need to make sure you pay taxes and talk to an accountant (preferably CPA) that can give you specifics on what you need to do.  

You have options when it comes to trading anywhere in the world there are places where it can be a little trickier and U.S. happens to be one of those places. So here you have one of the biggest Markets when it comes to trading and the New York session happens to be one of the most active sessions. So Why is it that there are so little retail traders in the U.S.? That is a great question. A retail trader can be simply defined as a personal trader not trading for the big boys like the banks so anybody like you or me.

If you take a look around at U.S. offered brokers you will see the selection is very scarce. This is really the only difference from trading in the U.S. to different parts of the world like Europe and Australia.

Reasons Why So Little Brokers Are In The U.S.

  1. Licensing and Regulations – I won’t get too much into details when it comes to numbers so I will keep them somewhat broad and approximate. One of the reasons there aren’t as many brokers in the United States vs a place like Europe is due to licensing. It cost anywhere between 100k to 500k to cover licensing fees in Europe in the U.S. that number exceeds 20 million. It boils down to being a serious investment and most brokers don’t see it being worth the headache to be regulated by the U.S.
  2. Profits – Brokers make money based on traders volume. Basically the more trades I do the more the broker makes money based on their fees and spreads. This is where leverage comes into play if you don’t know what leverage is basically it is a way to have a smaller account but have the opportunity to make more money by placing more trades (so you can also lose more money). U.S. only allows 50:1 where in Europe you can get up 500:1. This breaks down to roughly being able to place 10 days more trades at a time in Europe vs the U.S. aka 10 times the income! This is why brokers don’t see the need to go to the U.S. Leverage is dangerous so don’t ever over leverage and you as a trader can make money off of 50:1. I personally don’t go over 200:1.
  3. Fines – The regulators in the U.S. are harsh or at least can be and this is good they are there to protect but bad because it keeps you from being able to use good brokers. The fines are hefty which are handed down by NFA even if the actual reason is very small. Brokers need to be held accountable of course but there needs to be some leniencies especially when first adapting to the state’s regulations. As long as you aren’t stealing money from the traders themselves of course.

Those are a few of the big reasons why trading in the U.S. is tough so what can you do? Well you can go with an unregulated broker that is one option. And no before you ask it is not illegal to use an unregulated broker or at least at the time of this writing. There is however more risk involved with your money that is why I always say do your research, demo, start with a small deposit and withdrawal see how that goes before choosing a broker.

You can check out our reviews on brokers but still do your own research. I have used quite a few and still use mostly unregulated for numerous reasons. As soon as I am big enough (8 figures) I will use a bank directly or some other means in the U.S. I don’t keep all my money with one broker because it just isn’t smart to keep all your eggs in one basket.

Just like trading yes I consider myself a full-time trading buy I make a lot with SEO as well so I balance between the two of them. Basically for me trading has become my day to day job where SEO has become my passive job. Both of them together is how I walked away from my day 9-5 day job.

The opportunity is there with trading just as there are many other opportunities always try to look at things from a compounding perspective is it going to be worth it a year from now doing what I am doing? 2 years? 3 years? 4 years? 5+ years? With forex it is 100% yes because you are compounding your money every trade that you WIN and also learning compounds itself as well.

Is Forex Trading A Good Idea?

It is a good idea if you are willing to make the committment to the long term. If you come in thinking you will be an overnight success you probably won’t be. It can be as simple as learning the basics, learn a strategy, demo until you are winning 80%+, then go live….but there is a lot more to it then that which has a lot to do with the broker you choose, fees, spreads and other things along those lines. When you just do the math Forex is a GREAT IDEA! 5 pips a day can make you a millionaire and that is not an income statement just do the math or look at our compounding spreadsheet.

Can US citizens trade Forex overseas?

So if you are asking this question you are basically just talking about using an overseas unregulated broker. In that case yes you can just make sure you talk to some sort of tax advisor about what you need to claim. Use a reputable broker after you do your research, demo, small deposit, small withrawal go from there. Pay attention to the details with the broker if you are looking to go live as quick as possible. The biggest thing is to get in with a broker an demo so you can practice and get good at a strategy.

Do you need a license to trade Forex?

You do not need a license as a retail trader. You need a drivers license or passport for identification purposes for most brokers.

 

Other Related Questions From Readers:

Can You Trade Forex in USA?

We answered this questio but yes there are numerous legal options to trade forex if you live in the USA just look above and check out our review brokers.

Is Forex A Gamble?

There is risk with forex just as there is with gambling. However you are able to leverage in forex and can have a very high win percentage upwards of 80-90% if you put the time into a strategy that you favor. Where in gambling it is about luck and the house doesn’t always win but you are betting against the house. In forex you are betting against every trader so your odds are more in your favor. You can stack as many confirmations on your side as possible to further stack the odds. Trading can be simple especially after you get your VOT in (volume of trades).

Can I Make Money With Forex?

The amount of money you can make is mainly based on what you risk (Stop Loss included) vs your reward times your win percentage. That’s it. Anybody can make money with forex but you can lose it just as quick as you make that. That’s why I always advise risking around 1-3% max on your live account because you would literally have to lose I think it is 33 straight trades to blow your account. By the time you go live you should be winning 70-90% of your trades so that should never ever happen.

Forex is something you should look into especially if you understand anything about compound interest. If you have a 401k or other investments it is similar except your account compounds with every winning trade and you can trade as much as you would like 24 hours a day 5 days a week and also crypto on the weekends. Although I highly recommend against over trading, but to just set a trade limit and ROI limit for days you would like to trade. I trade 3-4 days a week and only take a max of 3 trades a day. If I lose twice I am done for that day.

Tab Winner

Hello I am Tab Winner welcome to my Forex blog. I have been trading Forex for over 2 years now and a stay at home dad for about the same amount of time.

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