I know that hedging is not allowed in US. Also there is FIFO Rule applicable for all US Forex Traders. I want to open a Forex Trading Account with a company which allows hedging and where there is no FIFO Rule. As a Canadian which company I should register with to get all these benefits?
Fellow Canadian here! 
If you trade with IIROC regulated brokers in Canada, you will [B]not [/B]be able to hedge.
However, there’s nothing legally stopping you from opening an account overseas with a broker who allows hedging.
I personally trade with an ASIC regulated broker in Australia (outside of my Canadian based account that is) called Pepperstone, but most ASIC brokers in Australia will take on Canadians. FSC regulated brokers in the UK are also likely to accept you.
Babypips thread on the broker I mentioned can be found here:
http://forums.babypips.com/forex-brokers/44011-pepperstone.html
I do suggest you stay to a well regulated region and broker. UK, Australia, etc… In Europe, each region has various regulators and they are not all the same.
Cyprus, for instance, falls under MiFID in Europe, but has extremely lax regulations when compared to other EU countries such as Germany (and thus, you’ll find droves of brokers operating out of Cyprus that are less than respectable. This isn’t saying all brokers from Cyprus are bad, just that the frequency of shady brokers tends to go up in regions of such lax regulations.)
Another example would be New Zealand, which is far more lax a regulatory body vs their other “western” counterparts. Many brokers setup shop there to gain the appearance of “western” quality and security but without having to conform to many rules. They are starting to tighten things now, but not by much, even just requiring a physical office (not just a virtual one) and some capital requirements caused brokers like Alpari to pull their main retail operations from the country (source.)
Going offshore, again, is legal for most Canadians (there are some issues with fine print and laws for some provinces, since each province has their own regulator and their own rules, but most do not restrict residents from going overseas even if they advise against it when asked.) You’ll be able to hedge, use higher leverage (400:1+) than what IIROC sets (which is lower than the CFTC/NFA set leverage in the US on some pairs,) you will not have to conform to FIFO and be able to close any trade in any order you wish, and you will get access to brokers with far more competitive spreads than what can be found locally (we have a lack of competition in Canada for local brokers.)
However, I should note:
[ul]
[li]If you can’t make money with lower leverage, then higher leverage will only increase your losses .
[/li][li]Hedging actually just ends up increasing the total cost of trading, since the additional tickets/trades need to be closed separately and thus the spread is crossed. Even the most efficiently managed hedging methods will not yield a better result than simply managing your trade in terms of exposure.
[/li][li]The same comment on managing trades in terms of exposure applies to FIFO. Regardless of which trade you close first, you’ll have the same net P/L should your exposure end up ultimately being the same. The difference is really just a visual/psych thing in the end.
[/li][/ul]
Hi Jack Larkin,
Thank you for the informative post! I am a Torontonian as well and currently looking for a suitable broker. I was hoping you could give me some advice. I’m a new to forex, so I apologize if I ask anything that is really obvious. I was wondering what you meant by “outside of my Canadian based account”?
I am looking for a broker that allows hedging, simultaneously having both long and short positions in one currency pair. I also want to be able to set different stop-losses for individual positions, rather then only being able to set 1 stop-loss that applies to all of my long positions, for example. Does Pepperstone that you speak of allow you to do these things? Is there any disadvantages in trading with an offshore broker? I recently opened an MT4 demo account with FXCM on the UK server to avoid FIFO regulations, but there seem to be mixed reviews about FXCM…
Any help would be greatly appreciated, thank you!
FXCM won’t let you open a UK account. They’ll funnel you into FXCM Canada and you’ll be under all the same IIROC rules and regulations as you would be with other Canadian firms.
You can achieve what you want with different stop losses with any broker really: Just split your position into multiple orders, and set each with it’s own stop and TP levels as desired. (If you want 10k long a given pair, but want two targets, just open two separate 5k positions at the same time and set their respective order levels as desired.)
As for the advantages of going offshore, there’s the drastic leverage increase available across the board for all pairs (instead of being set pair by pair at IIROC and quite restrictive at that), and hedging… not to mention, way more competitive offerings by way more brokers than what’s available only in Canada (we don’t have much choice and the choices we do have are expensive… some brokers here still think 2pip spreads on the EURUSD is good. Sigh.)
(Of course, there are disadvantages, as detailed in my earlier post.)
The key here is that you don’t have to go with an unregulated broker or any place shady when you go offshore. Most brokers in the UK and nearly all in Australia will take you and both areas of the world are well regulated with an active (customer friendly) regulatory body you can approach if something goes wrong.
Hi Eujn,
Welcome to the forum 
FIFO only applies to clients of FXCM US which has to comply with CFTC regulations. Since you live in Canada, you can open an account with Friedberg Direct (www.fxcm.ca) which has the advantage of being regulated in Toronto by IIROC. Another advantage is that your funds would be protected by the Canadian Investor Protection Fund for up to $1 million.
If you have any other questions about FXCM, feel free to ask me in the Broker Aid Station.
Jason
Great Post Jack very informative
Gp
Hi Jack, great info. I’m also a Canadian (toronto) in the process of trying to choose a FOREX broker.
[B]Question: Do you know if any of the overseas brokers you described are NinjaTrader friendly?[/B]
Please advise. Thank you!!
I totally agree with you, going offshore is turning a huge blessing now. There one gets to scalp and most importantly hedge. I am thinking that the lack of competition in our regulated markets is killing. We experience high spreads upon scam spread widening by our licensed brokers and we think it is normal and forgivable. I discovered that offshore a EUR/USD spread of 2 pips is an abomination and obviously high. Surprisingly, our licensed brokers are abusing their licenses scamming their clients regularly and getting less punishing sanctions. Oanda Review: Oanda FX real spread on MT4