What is the best Forex Broker for US Residents?
What is the best Forex Broker for US Residents?
With a quick Google search many would think Forex.com or Oanda.com to be the best Forex broker...
They might come with the best Forex spreads and strict regulation, BUT what it actually boils down to is your needs as a Forex trader. It can be helpful to use a regulated broker and they are great choices, but you'll also statistically destroy your chances of becoming successful.
Reasons you will fail with a regulated broker:
- 1:50 leverage cap, when offshore brokers offer 1:200, with upwards of 1:1000
- FIFO rules. This means your first trades made must be the first ones closed.
- No hedging, which is trading in both directions.
Interested in using automated EA's, Copy Trading or Manual Signals? Kiss that goodbye with regulated brokers. Due to their rules, you won't be able to participate in any of the above. If you do, they'll send you a nasty-gram and then shortly after disable your account.
But let's move on and learn about your options:
There are basically 3 types of Forex brokers:
1. Regulated & Trusted (dealing desk brokers)
Pros: Governing body oversight and accountability.
Cons: Limited leverage, too many trading restrictions to win for maximum gains, and no ability to fund with Crypto (Bitcoin).
2. Unregulated & Trusted (ECN or STP Brokers)
Pros: Higher leverage, no trading restrictions, the ability to fund with Crypto, and no sharing of your account information with any third-party agency (very important if you value your privacy).
Cons: At each investor or trader’s risk and discretion based on other’s experiences, due diligence, and results only since there’s governing/regulatory protection.
3. Unregulated & Unknown/Untrusted Brokers
No explanation needed, run as fast as you can!
When the Dodd Frank Act was passed in 2010, it fundamentally changed the game (in a negative way) for all retail Forex traders in the U.S.
Done under the guise of ‘protecting the little guy’, this heavy-handed regulation pretty much killed the potential for Americans to make bigger profits with U.S. brokers.
Not only were U.S. brokers forced to reduce leverage amounts from 1:200 down to 1:50, they eliminated the ability for us to hedge (take both sides of a trade to mitigate risk).
They also instituted additional FIFO (First In First Out) rules that made things way too restrictive for us to be able to use Forex robots like The Medallion EA.
All U.S.-based Forex brokers are regulated by the National Futures Association (NFA) and must comply with their requirements. However, unlike trading U.S. stocks, we’re not required to use regulated brokers in a decentralized market like Forex.
Regulation is always a double-edged sword because you gain some protection as an investor/trader, but you lose some significant advantages.
However, unregulated Forex brokers offer traders more freedom and flexibility than their regulated counterparts. This is why 95% of retail traders use unregulated brokers.
Fortunately, there are several reputable Non-U.S. Forex brokers that are willing to accept U.S. clients without any restrictions.
LQDFX is one of them. LQDFX is unregulated, but they’re very strict when it comes to global AML (Anti-Money Laundering) laws and KYC (Know Your Customer) banking rules.
They keep client funds in segregated bank accounts that are held with tier-one EU banking institutions including Barclays, HSBC, and Deutsche bank.
Holding funds in segregated accounts means these funds can’t be used for any other purpose other than trading activities initiated by us.
We’ve personally had accounts with LQDFX for over 2 years and have never had a problem with deposits or withdrawals.
Same thing goes for the over 300 Medallion EA clients that are using LQDFX. None of them (that we’re aware of) have had any withdrawal issues whatsoever.
LQDFX has a great reputation and is one of the few offshore brokers to offer live phone support, which is super helpful if you ever need to talk to a real person about your account(s).
That being said, we’re conditioned to believe that “regulated” brokers are better than the non-regulated ones.
Many people naïvely think that their money is somehow safe because it’s with a regulated broker. But the truth is, even the most well-researched regulated brokers can fail.
Just ask anyone who was a client of Lehman Brothers, or MF Global, another one of the largest brokers in the U.S. who filed for bankruptcy just days after posting a $192 million quarterly loss.
Or PFG Best, which was shut down in 2011 after the owner was charged with embezzlement.
Thousands of wealthy individual and institutional investors had all the due diligence in the world, yet they still lost hundreds of millions of dollars when these brokers collapsed.
Here are some facts about regulated Forex brokers:
● FXCM got sued by CFTC for falsifying their B-Book model
● MF Global redirected their clients funds to buy Euro bonds and went bust
● A large UK broker (Beaufort Securities) got busted for money laundering
● Average client loss ratio at so called “regulated” brokers is 77% based on ESMA (European Securities And Markets Authority) disclosures
● Latest ESMA regulations require all “regulated” brokers to get a so-called “B-Book” license if they want to keep offering services to retail clients.
“B-Book” refers to brokers that will take the other side of their clients’ trades and trade against them - they have an incentive for you to lose!
So... if there is a 77% probability of retail clients making a loss and “regulated” brokers are operating with the right to “b-book” you, do you still think that “regulated” brokers are better?
The point is, no one can guarantee that your money is safe any more than the U.S. government could guarantee Lehman Brothers or MF Global was “safe”.
One last thing on the topic of Forex brokers...
When researching brokers, the most important thing to look out for is a broker’s reputation and reviews online.
Because no matter whether a particular broker is regulated or not, if they’re trusted among traders, they’re way more likely to focus on maintaining their positive business image for long-term success.
However, let us warn you about something. When you’re doing your own due diligence on LQDFX, or any other Forex broker for that matter, you’ll undoubtedly stumble across broker review sites and articles with sensationalized titles like: “Is [XYZ Broker] a Scam or Legit Broker?”
In our experience, 9 out of 10 of these so-called “reviews” are nothing more than a bait and switch used by affiliate marketers to drive tons of free traffic to other offers they get paid on.
These “click bait” reviews are manipulative and borderline on being unethical because they use negative marketing tactics to attract and influence newbies to their offers, while causing distrust and uncertainty about legit brokers that, in reality, are rock solid.
We and many other professional traders we know wouldn’t use and recommend LQDFX if there was even a hint of any serious problems with deposits, withdrawals or anything else that would affect our overall trading experience.
Given the current regulatory regime imposed by the NFA and CFTC on retail Forex trading in the U.S., it’s important to use a vetted and trusted broker like LQDFX that can give us the best chance of succeeding long-term.