In the past several months, I had a demo account with Oanda, to learn to trade Forex. As time goes by, I decided it was time to open a real account with only a few hundred dollars. Forex has leverage of like 50:1 whereas a stock is 2:1 in a margin account. Depending on the Forex broker, the leverage can be smaller or larger which is determined usually by the broker.
During the registration process, a condition came up "You do not live in Alberta?". For people who do not know, Alberta is a province in Western Canada. Canada has 13 regulators for securities. Each province and territory has their own securities commission. I did some research and discovered Albertans can not trade Forex unless they meet one of the exemptions. I discovered this through google. The Alberta Securities Commission, or ASC, has determined that Forex is highly speculative and people can lose lots of money. This is not new , as I believe the rule is in effect over 10 years.
I called the ASC, to discuss how a regular person can trade forex. One of the exemptions is a networth of 1 million dollars or a annual income of $200000 ($300000 if a couple). I then asked if a person open an account offshore. The person I was talking said, "we can't stop you from opening account offshore. But if it is discovered, the open positions will be closed without notice and your account closed".
The person I was talking to at the ASC, said they had calls from about 20 people in the last 6 months, who in total lost 1.6 million dollars. Alberta is the only province in Canada, who doesn't allow Forex trading. I believe people should be allowed to trade as it is his or her money. However, I believe a person should have to sign something, saying the understand their is high probability of losing more money than initially invested.
A brokerage has to be registered in a province or territory in order for its residents to trade a particular market. So the brokerages can register with the ASC, but an exemption must be met before the person can open an account. This also applies to other high risk endeavors such as futures trading.
Conclusion:
Maybe the reason Forex, and other high speculative endeavors, are forbidden under ASC rules is due to the fact Albertans can make a lot more money than other provinces due to the nature of their jobs. This means the probability of a person trying to make money in a high risk environment is increased. When people lose money in the markets, they like to place blame on someone or something else. Some people do not want to take responsibility when it comes to losing money.
Disclosure: After the consultation with the ASC, I have no plans to open an offshore account.
DISCLAIMER
I
am not a financial planner, financial advisor, accountant or tax
attorney. The information on this blog represents my own thoughts and
opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Hey IP. Thanks for the information. I don't know anything about Forex trading and I'm just gonna stick with stocks. It's tough enough trying to understand the stock game, I'll just stick with what I know. Thanks for sharing.
ReplyDeleteHappy holidays bud.
Dividend Hustler,
DeleteThanks for dropping by. Trading is a whole different ball game than investing. Gotta cut your losses very quick. In a high leverage environment, you can get wipe out real quick when not using a stop loss.
Being an investor can be just as rewarding, especially investing in top quality companies that pay dividends and increase them constantly. That is a definite great recipe to sleep well at night.