New NFA Regulations – Dos and Don’ts

The new NFA regulations have arrived. For those of you who are trading with American brokers, here’s a basic list of things you should do, and more importantly, a short list of things you shouldn’t do.

The last hedge free forex trading week is over. When trading will resume on Monday, August 3rd, the new NFA FIFO regulations will be in effect. I assume that most American traders aren’t aware of the new regulations, and will feel it by themselves when the software changes.

Basically, if you open more than one position on a currency pair, you must close the first before closing the second one. That’s the NFA’s not-so-straightforward way of preventing hedging.

Now, let’s start with what you should NOT do:

• Don’t panic! Are you trading with an American broker? Are you using hedging techniques? Do you currently have more than one open position on a specific currency? If one of the answers is no, then you have nothing to do.
• Don’t close your positions immediately: despite these restraints, trading is still possible. If you have a good trade in hand, why throw it away just because of these restrictions. If it’s good enough, you’ll profit anyway.

Now let’s see what you can do:

• See if this applies to you. Some American brokers have subsidiaries abroad, so you’ve already bypassed the new rules. Check out the method of compliance that your broker made in order to adjust to FIFO rules. You can start with this list in Forex Magnates.
• Ask for explanations: Your broker should give you understanble information of the implications of this regulation mean on your software system. I know that the NFA FIFO complaince issues are quite confusing.
• Demo trade: Assuming you already have a real account that is live and kicking, this idea sounds strange. Well, the rules have changed, and you need to understand and practice them in order to get acquainted. You don’t want to lose your money just because you missed something, do you? Time to get back to a froex demo account.
• Take your business elsewhere: If you’re not pleased with your broker’s new sotware limitations, you can either check another broker’s software, or just take your money to a foreign broker, where the NFA can’t get you. It’s 100% legitimate. It’s your money, and you should feel comfortable about how you trade it. I’m sure that many forex traders will switch brokers on the new regulation issues.

That’s it for now. I hope that everyone will enjoy a safe journey to the new world of Rule 2-43, aka FIFO, aka awkward anti-hedging NFA forex regulation.