New NFA Rules And Forex Trading

NEW NFA Rules will kill your forex trading.Game over for anyone trading with an NFA regulated broker... no more, no less... it is as simple as that. No doubt you have already heard about the various new NFA rules that threaten to end profitability for many forex traders...The latest batch are kicking off after the market closes this Friday and it is one of those blows that will kill any forex trader who hasn't yet been terminated by their previous directive.

What a way to end the career of so many forex traders that use NFA regulated Forex brokers.Unless you have been living on Mars, you must know about the little "favors" the NFA has done for Forex traders! It has already been a few weeks since the NFA forced their first new directive on brokers and hurt so many traders... the latest batch will become "law" after the market closes this Friday and if your trading was not killed by the last rule they implemented, it will be this time! 3 new "rules" will take you from being a potentially profitable forex trader to a certain losing forex trader:

New NFA Rule #1: No way to have long (buy) and short (sell) orders open at the same time
New NFA Rule #2: No way to open orders with StopLoss and TakeProfit levels set
New NFA Rule #3: No way to close the order(s)that YOU want to close

Ok... I would like to review each of these elements in detail. Please over this carefully since it is your money at stake here:

New NFA Rule #1: No way to have long (buy) and short (sell) orders open at the same time. This is often referred to as "hedging" and, if you listen to the NFA, is a very bad thing to do. If, however, you step back and consider things sensibly and rationally, you can see immediately that hedging is not a bad thing at all - it is actually a very useful way to operate your trading account. What this rule actually means for you is that you are no longer able to trade your account with multiple strategies on the same currency pair.

Perhaps you trade several EAs (Expert Advisors), perhaps several manual strategies, perhaps a combination of manual and automated systems. If so, it would be very common to find some strategies / EAs trading long positions and some trading short positions - until the "experts" at the NFA decided that the whole idea of trading in two directions was bad for you and banned the concept!

New NFA Rule #2: No way to open orders with StopLoss and TakeProfit levels set. One of the most fundamental aspects of trading is money management and the best way to achieve that is with correctly placed StopLoss orders to accompany each trade opened. Another important aspect of money management is being able to take a profit on an open trade. Once again, the NFA disagree with long-held principles of trading because one of their new rules (takes effect this weekend) will not allow StopLoss and TakeProfit orders to be specified... you must choose one or the other! I am sure that this little revelation will send you searching for your crystal ball so that you can accurately predict which type of order you will require before actually placing each new trade.

New NFA Rule #3: No way to close the order(s)that you want to close. The final gem of an idea thought up for you by your caring, sharing NFA is something referred to FIFO (First In, First Out)...What that means is this: assume that you were trading EURUSD and opened a long position... the market moves up and looks like it will continue so you open another long position. Now price starts to decline so you want to close the 2nd order before it turns into a loser and let the initial order run in the hope that the upward move will resume, after all, you can always close the initial order later if the need arises...

Sorry - that is not allowed! The new NFA rules means you would be forced to close the initial order before you could close the second order. So, once the markets re-open on Sunday, the face of trading for vast numbers of people will have changed very much for the worse! If your current broker is registered (and therefore regulated) by the NFA then there is a very, very high probability that any EAs that you might be using will cease to function. Depending upon the order types used, there is still a slight possibility that an EA might continue to function if it was the sole trading system used on a particular currency pair, but, under the new rules there is no safe way of simultaneously running multiple EAs on the same currency pair - even if they were all trading in the same direction as the FIFO rule prevents an EA from monitoring and managing its own positions.

Remember: This does not just affect traders using EAs - anyone trading more than one manual strategy is also going to find things incredibly difficult from next week. To quote from the US national anthem "...the home of the brave and the land of the free (unless you trade Forex!)"

To HELL With This... THE Solution!
You have really only got 2 options - you either stop trading forex or you adjust. The bottom line is this... life is all about adjusting. Nothing is static in life... you have got to overcome those issues that eventually hit you head on! When judging any broker's performance, you need to take into account 8 criteria: Service, reliability, spread, slippage, ease of opening an account, reputation, suitability for the small trader AND MT4 compatibility.

Remember - it is not just about the spread... or the slippage... or the service - it is about a whole range of characteristics that are KEY to your forex trading success.

I know... many people might think "Damn, do I have to open a new forex account now "... YES, my friend - you do, unless you want to stay behind and suffer the bitter consequences. Do something about it now - do not just sit and wait for the new NFA rules to hit your forex trading account. From Sunday the 2nd of August 2009 You Can Kiss Your Forex Trading Profits GOODBYE! The clock is ticking and, to be honest, if I were you I would NOT want to have my forex trading account with an NFA regulated Forex broker come Sunday the 2nd of August 2009.

If you have not opened a Forex trading account yet and wish to do so now OR, if you have an account with an NFA regulated broker, then it is time to act...There are over 80 forex brokers in the market... most are CRAP. Most will scam you out of your hard earned cash. A few will be good... even fewer will be great, reliable and consistent.