I am a new trader about to start out; I’ve only been trading demos up to this point. I have frequented this forum a lot, and am learning a great deal from ICT and others!
For now, I’ve a few concerns, which I believe can be answered easily by veterans of Forex. So here they are… and I hope they don’t violate any policies of this forum; for as much as I’ve studied this site, they shouldn’t.
[B]First, its technical…sort of.[/B]
I learned in the demo that if the market moved against me, and was to hit my stop, I could potentially mitigate my losses by opening a counter position before my stop is executed and closing that position also close to that stop. This method, depending on the number of lots traded and its statistical probability of execution, could cut my losses. This, while being in the US, I was able to do on a fxcm demo mt4 account - which I now presume must be non-US. I then downloaded another firm’s (US-based) mt4 and created a demo account. There this strategy was prohibited with the words ‘Hedging is prohibited’ stated when trying to generate an order. I investigated what that meant and it turns out that I can’t simultaneously go long and short on the same currency pair. NFA - the self-regulating US agency - came up with this rule in around May 2009. CFTC backed them up and so, this is now the general rule for all US brokers registered with NFA and CFTC.
With that background that may not be news to most here, kindly indicate if my reasoning has erred. For the most part, I think I have it right.
So then…is it possible to open 2 accounts with a single US broker, and then hedge my original position in one account by countering that position in the second account. This may require thorough monitoring of the two accounts on my part, but seems like it can be achieved without much confusion. I am pretty sure that I can open two accounts at 2 brokers and do this, but would prefer to do this at one place. One more thing, should I be able to short lets say…Eur/USD and long Eur/GBP at the same time? I hope that that’s not considered hedging. :19:
[B]Second point[/B]
Once again - this time though originating at CFTC - limiting leverage to a maximum of 50:1 was implemented for all US brokers … I think somewhere around October 2010. This is not so much of a concern as I don’t think I’ll be using high leverage - after learning from veterans. However, I wouldn’t want to be strictly rendered powerless in doing so either - as is the case here. So I was thinking that why not open an account with a foreign broker. They don’t limit leverage or disallow hedging. This would solve both of my mild concerns. But then - another shocker! All foreign brokers accepting US clients must now register with CFTC/NSA and thus follow their regulations for US accounts. Otherwise, their legitimacy is hanging in mid-air. This I believe was implemented in around October 2010 as well; once again, I could be wrong here; please correct me in that case.
What concerns me greatly here as opposed to my previously stated concerns of hedging and leveraging is as follows:
So many well-known foreign brokers seem to accept US clients, as I gleaned from their websites. It doesn’t seem that they restrict leveraging or hedging for US clients - exception being Alpari US - as I learned (and probably few others). So if I still open an account with a foreign broker, I know I can trade unhindered. But I’m afraid that one day I may wake up to discover that that broker’s website is made unavailable to all US citizens. CFTC may ban that broker from doing business here, as the broker openly defied CFTC regulations. In that scenario, all my equity would be frozen, and I would have to go to great lengths to acquire it back - if at all. Does this worry others here who are trading with foreign brokers from UK, or Switzerland, or Australia, or elsewhere? I suppose you wouldn’t be worried if they follow US regulations for US-based accounts. But - as I have studied - many, if not most, don’t. So is it just an accident waiting to happen? How do US citizens here at [I]babypips[/I] with accounts at …lets say dukascopy, feel about it?
Well, that’s all for now; hope its not too much. I have more very basic questions for later though.