Is Forex Trading allowed in the US?

Forex Trading, commonly known as FX trading, refers to the exchange of different currency for either business, commerce, or tourism. It’s one of the most active trading markets around the whole world.

The Forex Trading Marketplace is the global marketplace for the exchange of national currencies.

Thanks to its international reach and global application to commerce, finance, and trade, the Forex Trading Marketplace is without a doubt the largest and the one with the highest liquidity. A report from the Bank for International Settlements has shown a daily forex trading volume of more than 5 trillion dollars. 

However, when it comes to the US, the rules are a bit different. Some say that Forex Trading is not allowed in this country. In any case, this is not true, and several US forex brokers work well in the US. Their rules are a bit different, but it’s time to stop this myth.

What is Forex Trading?

As we have already mentioned, the foreign exchange market is the place where brokers from all over the world trade currencies. Exchanging currencies is of vital importance to do international business and foreign trade.

But trading currencies is not only important for foreign trading. Also, tourists will find themselves in the position of exchanging currencies if visiting a foreign country.

We have mentioned the Forex Trading Marketplace, but it should not be mistaken for a physical place, since it’s far away from being such. Even if commonly referred to as “a place”, all currency exchange operations are done electronically (generally known as over-the-counter or OTC).

Using a computer network to process all currency exchanged operations means there is no need of having a physical place, apart from obviously, being much more comfortable. The Market is open 24 house 5 and a half days a week, across many different time zones

This means that the Forex Marketplace is very active at all hours of the day, and the exchange rate is always changing live.

Is Forex Trading allowed in the US?

A popular myth that circulates among newer traders is that Forex is not allowed in the US. However, Forex trading is not prohibited in the US!

That is not to say that forex trading is a bit different in the US. In fact, the government controls the work of US forex brokers closely, and only some are allowed to operate in the Forex Trading Marketplace.

Only a small group of brokers have the necessary licenses to provide their services to US citizens. Foreign companies may be banned from working with American customers in the forex trading market exactly for this reason, since they do not have the required license.

But why while in Europe is so easy to obtain a license to trade in forex, is so hard to do so in the US? The answer is quite simple: in order to obtain the forex trading license in the US, brokers must present liquidity of 20 million dollars. 

This amount is more than four times higher than the required available money for an equivalent license in Europe. This money works as a deposit and there are many more expenses related to getting the license, which really limits the access to the forex trading marketplace to just a few US brokers.

The NFA, National Futures Association, is in charge of controlling the forex trading in the US and it’s the entity that emits the license that US forex brokers need to have to work with US citizens.

So, while the law in the US doesn’t prohibit their citizen from doing forex trading, the way to do it is heavily controlled and there are several restrictions in place.