Social Trading for USA Residents
NFA and other USA Regulations
If you’re a resident of the United States and you’ve been looking for a social trading network or platform to join you’ve likely come across the following message many times: “I’m sorry but at the moment, we cannot accept customer from the USA.” Or if they do, the service offering you get access too is restricted compared to non-US customers.
The reason for this is that the US government passed a law called the Dodd-Frank Act. Aimed at avoiding another financial crisis the law puts many restrictions on banks in terms of the investments they can make and basically terminated currency trading in the USA. The key restrictions impacting social and copy trading are:
- No hedging of trades, i.e. you cannot have a trade in the same instrument open in 2 opposite directions (BUY and SELL). So, while most traders you might copy on social trading platforms don’t hedge themselves, this restriction becomes a problem if you copy more than one trader and they both open for example a EURUSD position in different directions.
- First In First Out (FIFO) trades rule. While it is possible to have multiple trades open of the same pair in the same direction, they must, however, be closed in the order they are opened. Plenty of traders and trading systems do open multiple trades in the same direction, and they don’t necessarily close them on a FIFO basis.
These government restrictions meant that even brokers which used to be happy to accept customers from the USA no longer do so. Your social trading options have become much more limited though not impossible.
Available Social Trading Platforms for US customers:
Social Trading for US Citizens on ZuluTrade:
Of the mainstream social trading networks which let you follow and automatically copy other traders, ZuluTrade is the only one which still accepts clients from the USA. But unfortunately, there are quite a few restrictions put on the service:
- While non-US customers can choose from about 10 to 30 brokers to open their accounts, US ones are limited to 2. Currently, these are Forex.com (Gain) and TitanFx.
- US resident are also restricted to opening one trade pair at the time because ZuluTrade has no control over the strategy their signal providers follow. This means you best look for traders to copy who normally only open one trade at the time themselves. If you copy traders who normally open many positions, your results will differ significantly from those of the trader you copy. The process we described above is applicable on FIFO, non-hedging account types. In general, for US investors, accounts have different setups depending on the broker applied settings.
- However, please be advised while there are always a few Brokers available for US Residents to trade on ZuluTrade it can happen that due to a very strict regulations there are none available at a time you are signing up. This is only due to a very strict Broker regulation rules in USA, which hopefully will change with the new Tramp politics. This means that you still can sign up and trade on Demo account and even earn money as a Trader/Signal Provider if Investors from other countries find your trading strategy interesting to follow. However, trading from live account will be only possible if you sigh up with Broker which offers the service to US citizens. ZuluTrade confirmed that they are looking to expand their Broker offerings for US citizens and are confident that this will grow this year.
US Traders/Signal Providers Compensation on ZuluTrade
ZuluTrade compensates US Traders by a variable monthly membership fee. Monthly compensations for Traders can vary depending on account size and signals generated per month. Please note that ZuluTrade Traders, who are NFA registered as an Introducing Broker (IB), receive half pip per lot for every trade generated in a Live account.
The monthly membership fee is calculated using the following formula:
((Aggregate customer capital following the Trader / Initial Balance) / 100) x Subscription fee
Initial Balance represents the Necessary minimum Capital required to cover the Trader’s maximum recorded historical drawdown. Aggregate customer capital following the Trader corresponds to the average amount over the monthly period.
Subscription fee is determined by the number of signals generated by the Trader during the month. Below is the schedule used to determine the subscription fee.
- 5 – 20 Signals = $50 Subscription fee
- 21 – 30 = $100
- 31 – 60 = $200
- 61 – unlimited = $350
ZuluTrade is free to join, try them with a Demo Investor account!
Social Trading for US Citizens on eToro
eToro in March 2019 launched in the U.S. market, giving Americans the opportunity to access the social trading service for the first time. The rollout, which spans 32 states and territories, includes eToro’s social trading platform and wallet for crypto assets only at this moment. eToro plans to bolster its support for other asset classes over the next 12 months and will also expand into more states pending regulatory approvals.
Trading is now live and supported across more than a dozen cryptocurrencies, including the following markets: bitcoin (BTC), Cardano (ADA), Bitcoin Cash (BCH), Dash (DASH), EOS (EOS), Ethereum Classic (ETC), Ethereum (ETH), Litecoin (LTC), IOTA (MIOTA), NEO (NEO), Stellar (XLM), XRP/Ripple (XRP), and Zcash (ZEC). The eToro wallet only supports a handful of coins.
eToro’s social trading gives U.S. traders the opportunity to now “collaborate with other [U.S.] crypto traders when making buying and selling decisions,” according to CEO Yoni Assia. Americans can now access CopyPortfolios to copy specific funds and portfolios and CopyPeople to copy other U.S. users.
Select a CopyPortfolio that fits your risk/return profile; enter an amount to invest; click the “invest” button to automatically allocate the portfolio. eToro gives you the option to explore the site with virtual equity when you first sign up until you’re ready to begin investing.
Social Trading for US Citizens on iSystem
iSystem gives you access to nearly 2,000 automated trading systems across dozens of brokers that trade everything from S&P futures to Euro Bonds and Gold. You pay a monthly fee to subscribe to a system and the trades will be copied directly in your broker account.
Nearly 1,400 automated trading systems created by 77 professional developers are tracked in real time across hundreds of client accounts, all of which are available to U.S. customers considering the strategies fall within the restrictions. More than two dozen U.S. brokers and half-a-dozen FCMs are supported. To use the platform, first explore trading strategies. Next choose a broker. Then activate the strategy and trade hands-free.
iSystem also gives users the opportunity to sign up as a developer and create automated trading strategies.
We’ve not tried this service ourselves, though, and no demo option is available. However, you can freely view the past performance of the trading systems on their website.
iSystem supports automated trading algorithms, not social trading. We decided they were worth a mention, however, considering the limited social trading options for U.S. investors and the fact that this is the closet alternative available.
Social Trading for US Citizens on Collective2:
Collective2 US-based copy trading network also brings “Trade Leaders” together with “Investors”. They’re broker independent so you’ll have to sign up with one of their partner brokers, most of which accept clients from the USA (although when we tried to sign up it only gave us the option to sign up with their preferred broker: Interactive Brokers).
Collective2 (C2) fancies itself as a hedge fund only without multiple layers of fees. The platform has been around for nearly two decades and supports a growing list of brokers that currently hovers at 20.
Before you can access a C2-supported broker, you must first select an AutoTrade plan, where prices are tied to the number of strategies. The monthly subscription fees range from $49 for a solo plan (one trading strategy) up to $299 for a Portfolio Plus plan, which reflects unlimited trading strategies. C2 also gives you the option to pay annually. Regular broker commissions apply.
There’s a good choice of Trading Systems you can copy, from equities to fixed income and derivatives, and we’ve been told that all of them are compatible with the US trading restrictions (which seems correct from the ones we looked at so far). Explore the systems on the C2 platform including historical performance. Select one or a few of them. Switch them on in your regular brokerage account. Expect no minimums, no lock-ups, and start/stop at your own discretion.
Some Trade Leaders do offer a seven or 30-day free trial period. (I could not confirm this – GT)
Social Trading for US Citizens on MQL5 Trading Signals:
There’s a dearth of Forex brokers who are authorized to support U.S. investors. It’s a highly regulated space that caps leverage at 1:50 and limits hedging activities, causing many forex brokerages to abandon the jurisdiction for greener pastures.
U.S. Forex brokers are regulated by the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). Forex brokers operating in the U.S. are required to maintain a minimum threshold of capital reserves to securely act as the middle-man between traders and the market.
Education site Forex Information lists only 17 brokers accepting U.S. customers, including the likes of Interactive Brokers, eToro, and Forex.com, among others.
MetaTrader is a trading platform used by more than 600 brokers worldwide (we don’t have the list of U.S. one though we know there are quite a few). Through the MQL5 website you can subscribe to automated signals or buy systems developed by MetaTrader4 and MetaTrader5 developers.
You can copy the signals or run the systems direct from your MetaTrader terminal. However, this would mean you have to leave your computer running 24/7. A cleaner solution is to find a broker which offers a VPS service or use virtual hosting. VPS lets you rent a virtual platform to copy a trader’s every move around the clock. MetraTrader suggests you select a server with minimum latency to your broker.
MetraTrader has multiple MetaTrader VPS service plans to choose from, ranging from $10 for a one-month subscription to $95 for a 12-month subscription, the latter of which reflects a 21% discount. The discount is proportionate to the amount of time that you rent.
New users of the MetaTrader VPS receive a free 24-hour trial period for testing and real trading. If you cancel within the first 24 hours of a subscription, you will receive a full refund.
While signing up, you must also select a purpose, which could be one of three: 1.) robots and indicators; 2.) signal providers; 3.) all of them together.
Unless you’re a little bit technical these options are obviously a little complicated. You’ll also still have to look through the systems yourself to find one which is compatible with your US broker account. Unfortunately, there’s no option to search specifically for US-compatible signal providers or systems.
We know that being a US resident is fairly restrictive when it comes to trading and finding a broker. However, we hope that the above solutions at least provide you with some options to try social and copy trading. This list is certainly not exhaustive, and we tried to focus on different types of solutions. When we come across any new relevant networks or platforms that accept U.S. customers, we will add them to this list. Your comments are welcome too?
Trading in CFDs and other leveraged products related to FX, commodities, indices, stocks and other underlying variables, carries a high level of risk and can result in the loss of all of your investment. Always consult an independent financial advisor. Never invest money you cannot afford to lose. Content on this website does not constitute advice and is for educational purposes only!