The non-farm payrolls report (taken from the establishment survey) attracts the majority of attention, often vibrating through financial markets. A favourable number (generally considered USD positive) reveals additional jobs were added to the economy, while a negative value (often viewed as USD negative), displayed as -100k or -90k, for example, means jobs were lost in non-farm business.
April’s non-farm payroll’s release was a huge disappointment. Payrolls increased by a less-than-impressive 266,000, following March’s downwardly revised 770,000 reading. With this, May’s figure will be widely watched. Note the three-month rolling average stands at 524,000, and the six-month rolling average falls in around 294,000.
According to the BLS, employment in leisure and hospitality increased more than 330,000 as a result of re-opening programmes across many parts of the country.
April’s figure weighed on the US dollar—as measured by the US dollar index (ticker: DXY)—though only a mild reaction was observed in US equities, through the S&P 500. This was largely due to the expectation the United States Federal Reserve is likely to maintain near-zero interest rates.
The general consensus for May’s US non-farm payrolls is an increase in the range of 650,000.
The Household Survey revealed unemployment was little changed in April, holding at 6.1 percent (March: 6.0 percent). Note the report’s official unemployment rate calculates by dividing the number of unemployed Americans (actively seeking employment) by the civilian labour force count.
According to the BLS, and also evident from the graph plotted below, April’s measures are significantly lower than April’s (2020) pandemic highs of 14.8 percent, but at the same time higher than pre-pandemic levels of 3.5 percent.
The real unemployment rate (U-6)—a broader view of unemployment than the official (U-3) release—represents the total of unemployed in the United States, including all persons marginally attached to the labour force and total employed part time for economic reasons (The BLS notes that marginally attached are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule). As you can see, the official release is artificially depressed.
April’s U-6 unemployment figure came in at 10.4 percent, down 0.3 percentage points from March‘s 10.7 percent reading—the lowest reading since March 2020. It is also worth noting that April’s 2020 pandemic high came in at an eye-popping 22.9 percent, while the U-3 official release was, as noted above, 14.8 percent.
May’s official US headline unemployment reading is forecasted to tick lower at 5.9 percent.
Calculated by the Establishment Survey, average hourly earnings is another key metric watched by economists and investors, measuring the amount private employees earn each hour in the United States.
In April, average hourly earnings suggested rising demand for labour, increasing by 0.7 percent from March’s -0.1 percent reading—this is the highest percentage print this year. (average hourly earnings for all employees on private nonfarm payrolls increased by 21 cents to $30.17, following a decline of 4 cents in the prior month—a touch higher than April’s 2020 reading of $30.07).
The consensus for May’s average hourly earnings is forecasted to decline 0.2 percent.
FP Markets Technical View
To gather an overall picture of the US dollar’s position ahead of today’s US employment release, the FP Markets research team has analysed—from a technicalperspective—the US dollar index according to the long-term monthly timeframe, the daily timeframe, as well as the H1 timeframe.
From the monthly chart, technicians will note April spun lower from a trendline support-turned resistance, extended from the low 72.69, with May extending downside to within striking distance of support from 88.55 (note we also have a 50% retracement level nearby at 88.28 and a 61.8% Fib at 88.27). Overall, the major trend is lower (see arrows). Couple this with the recent trendline support breach, this emphasises a bearish USD market, long term.
A closer reading of price action on the daily scale shows they recently breached the upper side of what’s known as a declining wedge pattern (91.43/90.42). This—given the bearish narrative since March 31st peaks at 93.43—is likely considered a reversal signal, with buyers taking aim at 90.91 (the wedge pattern’s take-profit target, derived from taking the base measure and extending this value from the breakout point [red]).
As for trend on this timeframe, we can, in line with monthly price action, see this market has been entrenched within a downtrend since topping in early March 2020, just south of the 103.00 figure.
Also notable on the daily chart is we’re coming from support at 89.67 and, in recent days, elbowed north of resistance coming in at 90.10 (now labelled support).
Ultimately, traders are likely expecting a bearish reaction off 90.91, as sellers look to fade into the current pullback.
From a shorter-term perspective, chart studies reveal the DXY recently touched gloves with a harmonic Gartley pattern (potential reversal zone [red] made up of a 78.6% Fib at 90.61, a 100% Fib projection at 90.57 and a 1.272% Fib extension at 90.66).
Should the above formation hold, support is considered an initial roadblock at 90.43, followed by the 38.2% Fib at 90.20 and the 61.8% Fib at 89.95 (values derived from legs A-D of the Gartley).
Stock markets across the world look overvalued, and many market participants are calling for a correction. Many catalysts could cause a sharp sell-off – such as rising yields, inflation pressures, strengthening US dollar, and so on.
The greenback usually advances during risk-off sentiment. Considering the dollar index has broken to the upside from a large falling wedge pattern which is a bullish formation, further gains seem likely.
As we saw last week, the entire market, including small and mid-cap markets, is sensitive to sharp increases in rates. Tech companies, which usually have no earnings, dropped the most as they are the most sensitive to higher rates.
Should the USD and yields continue to go higher, it will most likely cause some serious troubles in the equity markets.
Additionally, according to the Bank of America, investors’ cash levels fell to 4.0%, triggering a “sell signal”; The last time the sell signal was triggered was in February 2020 – everyone knows what happened next.
Another indicator from the Bofa, the Sell Side Indicator (SSI), is about sending a sell signal. The last time the indicator was this close to “Sell” was June 2007, after which we generally saw 12-month returns of -13%.
The long-term trend in US stocks is still bullish, and only a very significant correction would change that. However, the short-term picture doesn’t look so positive, and we might see some declines over the next few days.
President Trump branded himself as something of a saviour for the financial markets during his tenure.
He repeatedly stated, often vociferously, how the markets “love” him, and also publicly celebrated the strength of the world’s largest economy, taking most of the credit for its positive performance in the process.
His grandiose claims aren’t unlike a boxer’s public declarations before a fight, a commonly-used strategy to ‘psych-out’ opponents and promote the event they’re taking part in.
Trumps’ continuous claims that the markets are stronger than ever, began when he first took office. He’s credited the strength of the markets to his administration’s pro-growth policies.
In fact, he’s tweeted about how great he is for the markets, at least 150 times since he’s been in office, taking jabs at the Democrats’ performance whenever he can.
But has the market really come out on top after 4 years of Trump? Let’s take a closer look, separate fact from fiction and see which one of the two wins after the last 4 years of Trump as president.
Let’s get ready to rumble!
In one corner…
U.S. President Trump, weighing in at 235 pounds (according to his doctor), and prone to punching below the belt. His strengths; insisting loudly that his presidency has been GREAT for the markets.
And in the other corner …
The data, weighing in with a series of cold, hard-hitting facts (and also a few Trump knockouts under its belt).
During his first year in office, the stock markets responded well to President Trump. It was a trend largely driven by an increase in tax cuts and the Fed’s decision to lower interest rates. As a result, the market was not only stable but seeing consistent positive growth too.
In the 3rd quarter, GDP (gross domestic product) reached 3.3%. The stock market saw great growth, even breaking the 90-year record of positive returns for all 12 months.
The S&P 500 went up 19.42%, and its total return was 21.83%. This bullish market was the second-longest in modern history, beginning from March 9, 2009, and continuing 105 months through December 2017 without experiencing a decline of 20% (or more) from a closing high.
A new tax bill approved in December of 2017 lowered the corporate tax rate from 35% to 21%. This contributed to some of that market growth. The lower tax rate improved profit margins. The oil market finished the year on high (yes, those were the days), rallying in the last months of 2017.
Moreover, consumer spending and retail sales are also nurtured throughout the year.
All the growth culminated in a first-round win for Trump. Many attributed this great market run as a legacy of Obama’s economic plans, but, not surprisingly Trump didn’t agree, and didn’t hesitate to take all the credit.
Trump’s second year in the office started smoothly but was met with a sharp decline that resulted in zero net progress.
2018 was a tenuous year for the markets in general, which hit record highs and severe reversals. This was the first time ever the S&P 500 saw a drop after rising in the first three quarters.
In the last quarter, both S&P and Dow Jones plunged 13.97% and 11.8%, respectively. December was a frustrating month, as all indexes dropped 8.7%. Also, Dow and S&P 500 recorded the worst December performance since 1931.
The main reason for this uncertainty was that investors were fearful of the Federal Reserve’s policies and concerns over the U.S-China trade deal.
Besides this, there was a decline in the gold, oil, and bonds market. However, not all was wrong in 2018. First, three quarters saw a bullish trend, and the USD went up by 4.5%.
So we’ll call this one as a win for Trump, even if it is tenuous.
Entering into the third year, we begin seeing a different story. Trump starts a trade war with China, and the stock market declines, mostly due to rising interest rates and the president’s handling of the on-going Chinese trade negotiations and recreation of NAFTA (United States, Mexico, Canada Agreement).
The trade war was a major headline for the markets throughout the year, but something happened, which nobody was expecting. After the inception of the bearish market, the year ended with the biggest gains from stocks since 2013.
The S&P 500 went up 29%, and the Nasdaq went up 35%. With the Nasdaq upsurge, Microsoft and Apple enter into the trillion-dollar club.
So, how did that happen? It was mainly due to a change in the Federal Reserve policy. With the falling interest rates, investors poured their money to get more yield.
However, the growth rate was slower than in the previous two years.
2020 started with the bullish trend, and everything was going smooth, until…. you know what I am talking about; Covid-19, or as the president called it, the “China Virus.”
On March 18, 2020, the stock markets plunged to the same level it had been on the day of President Trump’s inauguration. That means any progress under Trump’s presidency was wiped out in a matter of two weeks. The real shocker was oil prices. The WTI plummeted 65% since January 2020. And it is not looking great ahead either.
The market did recover from June as bulls started to overthrow bears. FAANG (Facebook, Amazon, Apple, Netflix, and Google) were apples of investors’ eyes. Also, gold prices went way up, crossing the $2000 mark.
This was a good sign for the Trump administration as this was a hard year, and it was also a good sign for traders and investors who were pulling their hair when the pandemic started. Republicans even announced a $2 Trillion coronavirus relief package to boost the economy. In addition, it provided jobs to more than half of those people who lost their jobs during the pandemic.
But, the pandemic isn’t over. With lockdowns already starting to take place in Europe, and the U.S. elections, the markets will remain uncertain, at least for a few weeks. One major concern is the declining USD. Many analysts predict that this uncertainty will decrease after the election results. We just have to wait and find out.
The Winner Is….
With the 2020 elections result still coming in, Donald Trump did what he promised. After 4 years in the white house, Trump delivered for the markets, before experiencing a crushing defeat by ill-advised strategies and a global pandemic. In the first year, the stock markets saw record-breaking highs. No one is to say what the data would have shown had COVID not occurred. All being said, the markets have been relatively stable under Trump, if you count out the uncertainty caused by the pandemic. However, the reality is the pandemic did happen and worsened what was already a troubled market.
As election drama unfolds, we’re on the verge of finding out if a new game of boxing begins between Trump and the Markets.
FBS starts a new educational free course called Forex Intensive. The company’s financial analysts have created this online course for European clients to guide novice traders through the market and boost the trading knowledge of experienced ones.
Forex Intensive begins on October 1 and ends on October 31. During this month, those who subscribe to the course receive the exclusive analytical materials for traders of any level – articles, posts, and webinars – for free. Moreover, European traders may subscribe to the course all October long and have access to all the materials.
The course is five weeks long. Every week subscribers get a new email with the Forex Intensive program according to their level of knowledge. It allows European traders to educate in real-time with fresh materials and use the opportunity to join the webinars where it is possible to ask any questions to FBS analysts. The online format of the course helps to gain the information anytime and anywhere it is convenient for traders.
Within five weeks, traders learn the following topics:
Week 1: Forex essentials.
Week 2: Fundamental analysis.
Week 3: Technical analysis.
Week 4: Trading instruments.
Week 5: Management tips.
Despite the fact that Forex Intensive lasts the whole month of October, all the materials will be available for free anytime.
FBS is an acknowledged, CySEC licensed international online Forex broker and the official trading partner of FC Barcelona. FBS is a broker with an international outlook that serves clients in Asia, Latin America, Europe, and the MENA. Its primary focus lies in offering financial products for currency, metals, and indexes trading for clients with different goals and backgrounds. The company features a low barrier to entry and top-ranking apps. Over 11 years in the field, the broker won 50 international awards, including Best International Forex Broker, Best Forex Brand, and Most Progressive Forex Broker Europe.
There are thousands if not
millions of trading strategies or techniques, where each strategy is eventually a specific approach towards market analysis
either technical or fundamental, considering news trading or defining pattern
is a definition of execution parameters so once they are met it is a signal for
order placement or execution
Indeed, there are as many trading strategies as traders are, however, there are
some ‘standard’ strategies or known practices that are commonly used and in
most cases combine easy to use parameters yet showing great results. By the
end of the day, you, as a trader is the ones who will define the strategy to
use or might combine some known strategies into your own trading style, or even
might become more sophisticated to apply unique practices.
All in all, trading prosperity is
all about good education, discipline and constant development of knowledge, so always be sure to place your strategy at
the test before you go live and adjust techniques according to your trading
Indicate that none of the strategies are perfect
or 100% success performance.
So the ‘right’ recipe to your trading success is in your hands where all trading risks are considered and trading is approached in healthy and a good way. Besides, be sure to choose only among well-regulated brokers as a ‘wrong’ choice of your trading venue will definitely spoil everything, indeed scammers never sleep.
So here let us get to the point of
12 Best Forex Trading Strategies that are very popular and are highly used by
both amateurs, beginners or trading professionals.
Forex Technique #1 – Day Trading
Day trading simply means that trading orders are held
within a short time or within same day, intraday only, where trader targeting
smaller swings of currency pairs or instruments through the use either
indicators or specified execution signals, which are used within minutes or
hours only and are closed before markets or exchanges closing its daily
operation as well.
This method is widely traded by the professional traders and
those that operate large size, also by traders that use swap-free
accounts where overnight trading is prohibited while traders may use
various indicators and analysis for trading itself.
Forex Technique #2 – Pattern Trader or Trend
Pattern trader using a simple ability to read charts and
does not specifically require the use of indicators. The books say that every
instrument has its Pattern or a graph which swings and fluctuates in a harmonized
way and showing ‘defined’ behavior which is possible to read. So Patter Trader
usually uses ‘necked charts’ and analyses price movement that identifies behavior
mainly in the long term. Using this style, positions may stay open for months
or even years and mainly good for bigger size traders with good experience.
Forex Technique #3 – Swing Trading
Swing trading is another strategy that using mainly trend analysis and is a longer term trading since positions are held longer than a day that’s why it called swing. So in this strategy trader defines a significant movement of currency pair or other assets to the direction or another and places the order in its defined timeframe, which may take days, weeks or even months to achieve the goal.
Nevertheless, since you will keep positions overnight be
sure you learn about the broker’s conditions and fee structure, as there is a specified
swap or overnight fee defined by each instrument separately.
Forex Technique #4 – Range Trading
Eventually, range trading means that trader analysis and
defines trading range where the price is swinging back and forth, so upper and
lower levels are acting as support and resistance levels. The strategy works
well as primary counts on technical analysis while uses Stochastics or Strength Index or Channel Index indicators that say the
price would rebound from the lower level and falling from the high one.
Forex Technique #5 – Price Action
Price Action is a great trading strategy as it does not
involve any indicators or complicated ideas, simply you need to learn how to
read a price chart and define its behavior that works in respect to mathematic
rules of distribution and swings. As a result, strategy facilitate dynamic
support and resistance levels where you would spot chart pattern so again you
would buy lows and sell picks.
Forex Strategy #6 – Breakout
It is a quite simple technical
analysis bases strategy, as it solely based on indicators like Bollinger band
or moving average. The strategy might be helpful for those that prefer indicators
use where the breakout of the lines either upper or down one will suggest that
price is going to move into its ‘breaking’ direction.
Forex Strategy #6 – Liquidity trading
This method is also rather trend
trading where the best execution will be defined by the level of liquidity. It
requires a trader to identify and draw chart levels and liquidity swings with a
purpose to catch the next rise of the liquidity that appears either with
bearish or bullish directions. Also, this strategy usually using 2:1 ratios to
take profit and stop loss which is suitable for many trading sizes and accounts
Forex Technique #7 – Scalping
Scalping is a quite known
technique and a term used by the traders that benefit by taking small and even
very small profits but frequently, while mainly using short timeframes usually
minutes. This strategy can be performed manually or through automatic trading
via algorithms, yet it might be restricted in some regions and regulators so be
sure to verify those as well.
Forex Technique #8 – Hedging
A great strategy that is usually
used to protect positions where a trader holds both buying and selling
positions simultaneously. Potentially it allows a trader to go long or go short
and benefit from the successful trade, meaning you would close ‘wrong’ positing
and can even re-enter at a better price. However, this strategy is also
restricted at some regions so you would need maybe two different accounts in order
to perform hedging.
Forex Technique #9 – Carry Trade
This is an interesting strategy as trader investing in
one currency with a lower rate and following by trade of another currency pair
or asset with a higher price. The result of the trade will be a positive profit
between two trades where the length of the positions opened may take hours or
even days or weeks. As entry or exit parameter trader may use confirmation from
indicators or analysis that confirms the trend, as traders’ profit is
eventually an interest rate between two orders.
Forex Technique #10 – Pivot Trade
This is great techniques as you would need only to see
daily pivot levels on defined timeframes, yet strategy followers say daily chart
works the best here. So the technique is rather simple as pivots show you the direction
of the market either to bullish sentiment if price trading above the pivot
point, and indicates bearish direction if the price goes below pivot daily
Psychological levels are actually round numbers that are
very often key levels in Forex or other asset Charts. This technique is
accurate to replicate how traders or human psychology works since there is a better
reaction on rounded numbers. So trading round numbers or Psychological levels
that are defined like support and resistance levels used for entry or exit of
Forex Technique #12 – Overbought and oversold
This strategy is based on mathematical price distribution where strategy mainly uses RSI (Relative Strength Index) that indicates if the market is overbought or oversold if it crosses defined ‘normal’ levels. Actually meaning that traders will use it as a signal that price is going to fall back or rebound.
Swissquote as a leading online Swiss bank and broker looking to diversify its portfolio by adding an opportunity to trade FX Vanilla Options.
Newly added Swissquote options are available for 45 currency pairs that offer individual trading strategies together with expiry dates tailored to days or even one year. In addition to that, FX options perfectly allow you to manage trading risk on currencies, hedge or engage to various strategies in a range of instruments.
Overall, Forex Option as a European fully legal wat to put options enables global traders to much better and wider opportunities suited to individual strategy. Indeed, the financial industry in recent years changes truly quickly and radically, making in some ways difficult to find a correct lead and choose an instrument to trade. However, nowadays it is much easier to obtain information than ever before making it possible to learn and understand the pros and cons of each strategy or asset which Swissquote will be gladly supporting by its advanced educational materials as well.
Swissquote was launched back in 1996 as a financial platform and ever since is highly respected within and beyond Switzerlandbroker for its advanced trading platform full of features, great functionality they provide and attractive opportunities for Forex trading they offer.
In fact, Swissquote is a leading provider of online trading services and is the largest financial portal with comprehensive information to learn, develop and invest. You may read full Swissquote Review by the link and get to know about their offering in a detail.
It is a fact, Forex industry grows daily by bringing tempting opportunities and uniting millions of traders from every corner of the world and making things possible not only for “Trading Sharks” as before but even for a very beginning investors with zero experience.
Rising demand for Forex, trading and investments itself, however, attracts numerous scammers being even more “smart” as an increasing number of incidents shows. Even knowing that you should check brokers offering and its obligation towards regulatory restrictions and authorization risk remain high.
Being a dynamic industry, the biggest trump investors facing recently is that once news about ESMA leverage restrictions was confirmed, immediately traders started to search other opportunities beyond European offering, which are now also restricted from Australian brokers still allowing high leverage. So many investors had to fall under the trap of unscrupulous brokers, offshore entities or even scams that of course waited right behind the corner to offer allured opportunities. As we always warn our readers, never sign up with an offshore broker and check on the company regulation before any investment is done, read more about Unregulated Brokers here.
Together with all the world trading and financial situations, indeed a global need for well-regulated and safe trading jurisdiction that do authorize Forex Brokers, oversee them but still allow competitive trading conditions became prominent. And here is where South Africa came, with its FSCA regulatory body and attractive opportunities to both brokers and traders. Discover more about FSCA regulation by the link.
In fact, South Africa quickly becoming a leading hub for Forex Brokers while constantly improving its positions and developing networks, products or offering to the advantage of clients or traders that definitely assists in South Africa growth as Forex destination.
There are already numerous world-leading brokerage firms operating entity in South Africa and strongly comply with local Regulation FSCA, which including leading Brokers like FXTM, IG Group, HotForex, Plus500 and more, click by the links to know more about brokers offering in a detail. And of course, together with nowadays situation South Africa and all world communities expecting larger growth and expansion of the industry even further.
The Financial Markets Authority (FMA) of New Zealand, the government agency responsible for financial regulation, have issued a warning against FX broker Trade Fintech. According to the statement, the regulator is concerned that TradeFintech may be operating a scam and accordingly advises New Zealand residents to exercise caution before dealing with them.
The Financial Markets Authority (FMA) plays a critical role in regulating capital markets and financial services in New Zealand. It is the New Zealand government agency responsible for enforcing securities, financial reporting, and company law as they apply to financial services and securities markets.
TradeFintech offers trading Forex and CFD and operates through the website www.tradefintech.com. Our main concern about the broker is the confusing information provided on the website, which doesn’t add much trust to it. The terms and conditions have two similar statements, the first one is that the company is operated by S.O. Strategic Partnership, based in Scotland, UK. The second statement is the broker is owned and operated by Fintech Technologies, located in the Marshall Island. Those brokers registered offshore are not considered as reliable ones, because they are basically are not overseen by any authority.
In addition, the UK’s Financial Conduct Authority has warned against TradeFintech in September 2018 and the broker has way too many negative reviews and obviously cannot be trusted. We always advise traders to avoid dealing with unregulated offshore-based forex brokers like TradeFintech, as most of them are involved in investment scams. There are a number of properly licensed brokers to choose from, like the ones regulated by the Financial Conduct Authority or the Australian Securities and Investment Commission. You can read our review on this broker here.
Portuguese Securities Market Commission (CMVM) has added one more unregulated forex broker to its warning list last week. The regulator issued a formal warning against Trader.Online as the broker is not authorised to carry out any type of financial intermediation activity in Portugal.
The Portuguese Securities Market Commission, also known by its initials as “CMVM”, supervises and regulates securities and other financial instruments and activities of all those who operate within said markets. It is also CMVM’s mission to ensure the stability of the financial markets, by contributing to identify and prevent systemic risk and contribute to the development of financial instruments markets.
Trader.Online is operated by IVY Capital, an offshore company registered on the Marshal Islands, and is not authorized to offer forex and CFD trades in Portugal. Besides Forex Trader.Online also offers CFDs trading on commodities, stock, indices and crypto coins. There is one more company behind the brand’s name, DDK Ltd. that claims to be registered in Bulgaria. However, the company is not licensed by Bulgarian Financial Supervision Commission.
We have also found a lot of negative reviews from the traders. Some of them cannot withdraw their funds and profits, others haven’t heard from broker since their first deposit. It seems that Trader.Online is just one more unregulated company trying to deceive customers.
Generally, we always advise traders to avoid dealing with unregulated forex brokers, as most of them are involved in investment scams. There are a number of properly licensed brokers to choose from, like the ones regulated by the FCA or the Australian Securities and Investment Commission.
You can read our review on this broker here.
Jurisdiction: Dubai International Financial Centre (DIFC)
Headquarters: Dubai, United Arab Emirates
Credit and banking services
Collective investment firms
International commodities derivatives exchange
Commodities futures trading
Trust and custody services
International equities exchange
The Dubai Financial Services Authority (DFSA) is the independent financial regulatory agency that was created simultaneously along with establishing the special economic zone DIFC Dubai International Financial Centre, in Dubai, United Arab Emirates. This specific area was created back in 2004, with a purpose to enable specific conditions where the economy and finance with its own civil and commercial laws will develop throughout its global nature and act as a business hub for the Middle East. As the Middle East is known for its conservative approach to business and generally the way of governance, it was a need to create an area where numerous Sharia laws will be followed, yet will allow global firms and entrepreneurs to set the base of international business in the area. Indeed, the approach was a great move that showed for last decades fastest growing indicators with a boom of economic by itself and Dubai utmost development at almost any aspect. Dubai as being distinct from the UAE’s which falls also under federal Securities and Commodities Authority that covers regulation of the whole UAE economy. However, the DFSA provides a regulatory environment of international standards in DIFC zone specifically.
The DFSA’s regulatory providing a financial service authorization and is a must for financial firm established or that carries out activities in the DIFC. This includes Banks, Brokers and Trading Dealers, Asset Managers, Wealth Managers, Corporate Financiers, Insurances, etc. The financial company established in the DIFC allowed to have foreign ownership and is subject to a civil, commercial and regulatory environment that is similar to the United Kingdom legislation. The DFSA operates a regime similar to the MiFID, whilst the protective tools enable market participants to engage in a Professionals market or allow a retail endorsement to undertake retail business or trading.
Why trade with a DFSA regulated broker?
There are no doubts about Dubai influence and importance in the financial world, which acts as a huge financial center and serves some of the wealthiest traders, investors and businessmen. Being a center of the Middle East economically, Dubai is an Islamic State where the Sharia laws are applicable to even business models or money management. Indeed, Sharia laws are quite different and strict at many points, however, Dubai allowed some progress, which was not available before. The foreign ownership of the company enables operation in Dubai throughout low taxes and utmost possibilities, while in fact, companies can establish business with very small government interference.
So what does that mean for Forex Brokers? As the Dubai opened their doors to many international investors with an opportunity to perform a business, as well as giving access to some of the world reaches investors, vast of brokerages opened their branches or empowered their firms in jurisdictions. However, there were many of the companies that didn’t bother to obtain a necessary regulatory status and to be a truly Dubai authorized broker, therefore deliver a trading environment in a way they see it right. Thus, it is possible for brokers to set up a brokerage in Dubai without being regulated by the DFSA. Of course, that involves a significant risk to fall under the fraudulent or scam operation, which unfortunately the Middle East and Dubai in particular still known for. While the question about trust comes up, as the Dubai and Middle East population is a relatively new participant in investment and financial trading, the unscrupulous brokers try their attempt to attract reach, yet naïve investors, by a “lucrative offering” and basically steal their money.
In reverse, DFSA mission is to protect all participated parties that act in financial trading in Dubai and to enable fraudulent free and transparent practice, thus the certain degree of safety can be guaranteed only by the authorized brokerages. Basically, the DFSA license is a guarantee to the investors that the company comply with the strict regulations and constantly checked on in terms of their service delivery.
So let’s see what are the requirements of the companies in order to become a legal, authorized DFSA company, as the authority attempts reverse towards professionalism and efficiency of the trading environment. Under the law, the DFSA has power to govern activities and general behavior of market participants and brokers in particular. At the very beginning of its history and DFSA regulation of the market, there were mainly professional clients, which affected on a list of requirements and the model the authority operates. While further, the capacity of retail investors increased rapidly on a yearly basis, the DFSA made vast of changes to adapt the regulation to current and the most sufficient manner. Therefore, the requirement included more than $1 million in liquid assets and not involve the local currency the UAE Dirham. In case the company directs its service to retail clients it demands additional endorsements with the details forwarded to resolve clear offering to ensure respective proposal, throughout the honest competition and applied restrictions on marketing or misrepresenting of facts in any way.
Of course, this high requirement was not met positively by the brokers, thus most of the brokerages operated illegally, with no authorization. However, since the authority recognized the risks and growth of retail offering or demand, the DFSA centered new requirements and included additional measures and controls. Recently, application fee varies depending on the financial service and ranging from $15-17,000, while the accreditation process will check on the essential level of the staff and top management accreditation and professionalism. In addition, the strictest compliance related to the broker’s money management, while the company should strictly segregate clients’ funds and provide risk disclosure statements with respected regulatory supervision.
The DFSA regulation has much in common with the US regulation with a principal of the NFA and CFTC, which made DFSA work closely to international jurisdictions. In addition, the broker may choose between the regulatory guidelines adopted by the UK, US or Cyprus. However, DFSA still reserved any trading restrictions, which includes SWAP account for Islamic traders that is designed according to Sharia laws, and a higher minimum margin requirement that is set between 2-5% and accordingly lowering possible leverage. Furthermore, the regulated broker should provide regular reports on audit and performance, a track of the transactions and ensure the flow of the DFSA guidelines. Otherwise, the company may receive impose of fines, face penalties or be even dismissed.
Consequently, the facts of the applied regulations and requirements indeed confirm DFSA sharp references, yet in order to improve their service and the position of the Dubai and Middle East in trading and financial markets, DFSA makes their truly hard efforts to make things better. In 2017, the DFSA conducted a review of subjects concerning financial crimes, with a purpose to improve certain areas of financial trading improvement as the authority identified objectives to risk-based assessments. The DFSA findings reviewed and divert to lack of supporting analysis and money laundering financial risks, application of adequate systems and controls of transaction monitoring, placement of more strict policies and procedures with clients, etc. In light of the disclosure, the DFSA point to introduce a number of actions and focus more on financial compliance according to the international standards. Therefore, the regulator tends to check on the implementation of processes, regular involvement in development, maintain supportive development of internal procedures, along with the constant improvement of requirements and supplement of amendments to supply.
In addition to that, the recent updates show that Dubai authority entered into an agreement with the Singapore MAS (Monetary Authority of Singapore) to frame cooperation and develop an environment to sustainable development of financial services throughout technology. The agreement is going to deploy the growth of innovation and FinTech firm’s application towards their global extend between the two markets and further. In simple words, that means that the cooperation mechanism will refer businesses between the functions of markets, increase application of latest technologies like digital payments, blockchain and flexible platforms. The general trend shows that international authorities of respected markets and jurisdictions engage more into cooperation and associated planning with a purpose to improve overall financial stability and integrity between the markets. The collaboration permits a long relationship between the parties, providing an extended basis of protective tools and measures towards investors or traders and promises further improvement of service.
The DFSA regulated brokers surely do have a procedure to resolve disputes with clients, yet investor able to go further and submit a complaint. With all regulatory guidelines, if a trader or investor believes in unfair trading experience with the broker, or reach out the fraudulent activity, violation of the laws they can file a complaint directly to the DFSA. The trader should describe what has accrued, provide evidence of events, attach documents if applicable and include details of the situation or another, while DFSA will investigate the case further.
DFSA also gives direct input to the traders through the official website and served sources, to promote understanding of the financial market and necessity of regulation, with an aim to maintain confidence in the DIFC industry. The permanent support of DFSA allows to check-on the latest regulatory news, understand the basics of investing, provides guidelines on how to avoid frauds, as well as gives advice in order to resolve complaints or disputes.
As the fraudulent activity of forex brokerages and investment firms in Dubai still remains at the high level, the potential investor should stay attentive to common scam signals alike unfamiliar calls with incredible opportunities or complex investment as well not to trust in everything said. And of course to avoid by any mean unlicensed or unregulated brokers.
In order to check on the company or another, which is the necessary step, the DFSA online listing carefully appears the forex broker license details and information, which is available on the DFSA Public Register.
In general, DFSA oversees over 600 entities and authorized hundreds of brokers, while also is responsible to regulate financial and ancillary services, supervise and enforce anti-money laundering (AML) and counter-terrorist financing (CTF) requirements applicable in the DIFC.
In order to choose on the best broker or to check the company, you should also read DFSA Brokers Reviews and get updated information from the engaged traders and other participants. For instance, our website designed to assist in market data includes hundreds and growing of Regulated Brokers Reviews along with Brokers to Avoid, and other useful data.
As the Dubai investors face some problems and fall victims of numerous frauds due to a possibility to enable brokerage firms without DFSA regulator, it is hardly advised to choose only those firms that hold necessary operation license and are authorized. Important to mention, the issues appeared only with non-regulated firms operating in Dubai.
As Dubai Financial Services Authority ensures highest quality services to the customers through its strict regulation and constant, very promising improvement, high liquidity proposal, software quality and reliability, safety data and banking, as well as customer care standards. At instance the protection by the applicable laws usually available only with the DFSA regulated brokers. Therefore, DFSA truly helps Dubai and Middle East markets to progress in the industry and make the necessary steps in order to facilitate strong position and a transparent possibility of the international offering towards investors and traders.