All about forex in Canada

More than $5 trillion USD on average daily trading volume is made – and as a result it is the world’s largest financial market. What is appealing about it, is that it is extremely easy to trade as it’s availability is convenient with round-the-clock sessions, offering high leverage (in certain regions) and low costs.
One of the biggest challenges for traders is to find a decent broker that fits what you are looking for in a platform and where you can easily register and trade in. While there are dozens if not hundreds of brokers worldwide but only a handful to choose from within the US and specifically Canada.

Top Canadian Forex Trading Platforms

The limitations that exist within Canada specifically are those put in place by the national laws of the country. As a result, just like in gambling you may have a limit in your choice. For example – if you’ll look around you’ll see that many brokers indicate on their homepage that they do not accept Canadian citizens onto their platforms. At the moment there are two main brokers we recommend you trade on which are X and Y.

How to Verify IIROC Regulation

To identify if a forex broker is regulated as Dealer Member by IIROC, the first step is to identify the registered name from the disclosure text at the bottom of the broker’s homepage.

About the IIROC

IIROC is a national self-regulatory organisation (SRO) that was established as a non-profit corporation on June 1st, 2008 as part of the consolidation of the Investment Dealers Association of Canada (IDA) and the Market Regulation Services Inc. (RS). IIROC is recognised by the

About the IIROC

The IIROC is a national SRO which stands for self-regulatory organisation. It was originally established on June 1st 2008 as part of the Investment Dealers Association of Canada (IDA).
Below you will find all the regulatory bodies of each province in Canada:

  • British Columbia Securities Commission
  • Alberta Securities Commission
  • Saskatchewan Financial Services Commission
  • Manitoba Securities Commission
  • Ontario Securities Commission
  • Autorité des marchés financiers
  • New Brunswick Securities Commission
  • Nova Scotia Securities Commission
  • Prince Edward Island
  • Newfoundland Securities Commission
  • Among some of the most sought after features of traders worldwide and in Canada are the platform used by each broker, with the the most popular being the MT4.

    MetaTrader Overview

    Metaquotes software corporation were the original developers of hte MetaTrader (MT4) platform and eventually MetaTrader5 (MT5). This platform is licensed by brokers and is offered to traders worldwide and as a result is continuing to be one of the most widely used trading platforms in forex and contract-for-difference (CFD) markets worldwide.
    As a result of its popularity and long-lasting development, codebase documentation and extensive articles provided by the developer and its global community of users which make it ideal for both professional and retail traders. As a result – it makes it super easy to find resources they require to create algorithmic trading systems as well as possibly carry out manual trading and social copy trading.

    MQL Programming

    There is a syntax created for MT4 and MT4 known as MQL (Metaquotes Language) which allows programmers to create automated scripts and trading systems such as EAs (Expert Advisers) and automated scripts.
    You can find more information about MQL here https://docs.mql4.com/ – this language allowed for the growth of a secondary marketplace that grew thanks to programmers who created scripts, including libraries, utilities, indicators and automated trading strategies and to this day continues to evolve and grow.

    MetaTrader History

    MetaTrader brand launched in 2002 and the third generation software MT4 was launched in 2005. By 2010 the company launched MT5 to expand into additional asset classes, which include both futures markets and securities.
    As forex grew in popularity – the availability for traders to buy or get plugs for free was growing and allowed them to hire developers to code their Expert Advisders on the freelance section of the MLQ5 community marketplace, which you can find here https://www.mql5.com.
    As MetaTrader brokers grew in numbers – competition has also grown and many brokers are competing to obtain a higher market share as well as new market entrants.

    What are Contracts-For-Difference (CFDs)?

    CFDs stands for Contract-for-differences are essentially values of a derivative whose values result from change in market value of a specific asset or underlying instrument – which could include an index, market sector, share, currency or commodity – without the actual ownership or acquisition of that asset.
    What makes this unique is that it is intended to be a purely speculative investment geared towards either an investor or spectator who is interested in such an activity. The opportunity in CFDs is high thanks to leverage as the smallest change in market value can turn into a pretty big change in the value of a position, especially if you consider the required minimum deposit to be made upfront. Another typical trait of CFDs is that it is typically intended to be done as a short-term investment – taking as little as a few hours to open and close the trade.

    What to Keep in Mind When Purchasing a CFD

  • CFDs are high-risk investments that can lead to investors losing most or all of their investment quickly. Here are some more things to think about if you are considering investing in CFDs.
  • For a broker to offer CFDs – the dealer must be registered with IIROC. For residents of British Columbia, it is not possible to sell CFDs to a BC resident.
  • CFDs are highly – leveraged and offer high risk opportunity where you pay little up front margin, and small changes in the traded instrument or asset result in significant changes for the investor
  • In general, CFDs are used for short term speculation rather than long-term investment
  • Being Wary of Investment Fraud

    Unlike Forex, binary option companies are known as fraudsters who provide you with an ‘opportunity’ to invest in what is known as CFDs (Contract-for-differences) which have return offers that are just unrealistic.
    A few pointers investors should look for include the following –
    Status of Registration – As an IIROC dealer member you are protected from fraud in specific ways – and can check online for the firm’s status here – as well as the IIROC website which is here No presence in Canada: In order for a dealer to be registered with IIROC it has to have an office and presence in Canada, it is recommended that those who don’t be reported to the BCSC here Complicated Jargon and Glossary: Those who intend to commit fraud tend to use heavy and complicated jargon which are complex. If something is too complicated it tends to require clarification which the broker should open to provide or otherwise needs to be checked with the BCSC
    There are various pros and cons to consider with trading – if you are a beginner, it is best to avoid assets that require larger trading accounts like stocks, mutual funds, options, futures and exchange of traded funds. Forex would be the best option for smaller to medium size accounts as a good starting point.
    It is always best to focus on regulated brokers especially if you are beginner – if you are already a successful hedge fund trader and have the funds to handle losses or have the skill of an experienced trader then you may have a bit more to choose from.

    Market Order Types in Forex

    The typical unit in which forex traded is in lots where orders are made in incremental transactions. As forex is a serious part of the financial global market – these transactions or orders are executed through brokers based on a variety of trading conditions. Among the most popular type of transaction order is that of buying or selling a currency pair at the most ideal market price, and is typically done instantaneously based on the market liquidity. Among the other orders of Forex are

    Stop loss order – predetermined price closed positions
    Limit Entry Order – below or above a certain price

    Good till cancelled order –based on an open position which remains in ‘pending status’ at the ‘strike price’ until the trade is canceled by the trader
    One cancels the other order – Transaction in which an order overrides and cancels another pending order

    What is the CFTC – Commodity Futures Trading Commission

    CFTC is an American independent federal agency which was established by the CFTC Act of 1974. They are in charge of regulating the commodity, options and futures markets and the goal is to make competition among future markets and protect the investors against abuse, manipulative practice as well as fraud. You can read more about futures markets here https://www.investopedia.com/terms/f/futuresmarket.asp

    Ontario Securities Commission (OSC)

    OSC – which stands for Ontario Securities Commission – is an independent Forex regulatory agency, and covers the legislation territory of the province of Ontario. The FTRACC which stands for the financial transactions and reports analysis center of Canada, has confirmed and approved the presence and the work of the OSC. The OSC acts as an additional regulator over the Forex Brokers that are Canadian. Their overall purpose is to protect investors from the unlawful, improper and capitalistic markets.

    British Columbia Securities Commission


    BCSC – which stands for British Columbia Commission – at the moment has 10 commissioners who ultimately protect the finances and personal data as well as the brokers from various cases of fraud and scams. The agency is self-funded – so traders prefer them as those who enforce the signals to more independent regulatory agencies.
    As a result of Canada’s size and due to a lack of a central regulatory authority – Canada has the biggest number of regulatory organizations in the world. Various studies had been conducted in Canada and has requested expertise from a single regulatory authority which would be able to ultimately regulate and supervise all the financial firms operating in the country. Meanwhile, the Government of Canada has been looking at unifying or merging all regulatory organizations under one single entity – but this has not yet happened. At the moment – the brokers of Canada are regulated based based on the territory of where they operate.

    Why Do FX Brokers Stay Away From Canada?


    It is currently not possible to operate in Canada without a regulatory license so it shrinks the base of operations down to a relatively small group of brokers who are able to provide services to the retail trading market. There are also tax benefits as well as trust that comes with Canadian brokers being regulated by Canada authority.
    The regulatory structure of the Canadian system is still in its early and primitive phase and there still remains a lot of uncertainty and unknown factors regarding the regulation of financial entities.
    Another difference between Canada and the US – is that Canada is quite easy when it comes to the sending and receiving of money through international brokers, so long as the broker and the trader are following all the anti – money laundering laws.
    Why do brokers chose Canada as a home to their offices? They have looser regulations and regulatory environment which is what traders are essentially looking for. Canadian forex brokers are open to traders who are living in almost every country around the world.

    The Advantages Of Choosing Forex Brokers In Canada


    Disregarding the fact that Canadian citizens have the option of choosing any Forex broker of their choice, choosing FX brokers and other related companies in Canada provides unprecedented levels of security of client funds. The CIPF guarantee of $1 million in compensation, if a broker fails, in itself a great way of ensuring the safety of customer funds. The one thing that worries all investors worldwide is the security of funds, as there is a significant chance of a broker going bankrupt due to any unexpected market volatility. Modern regulators factor in market eventualities while developing their regulatory guidelines, which help in preventing cases of broker insolvency, but no broker is completely safe against liquidation or bankruptcy.
    Under such circumstances, it makes sense for a trader to choose some of the best Canadian Forex brokers if they wish to trade with large sums of money. $1 million in investor compensation does provide a bit more freedom and flexibility to the trader to enjoy more profits without ever worrying about their broker shutting up shop and not paying back a dime. In contrast, UK regulated brokers only offer a paltry £50,000 as compensation if a broker fails, which takes the CIPF compensation to a different level.

    How To Choose The Best Canadian Forex Brokers


    Due to the multiple regulatory agencies in Canada and the lack of laws that do not force brokers into setting up an office in Canada, it is indeed difficult to get a large number of choices for Forex brokers from Canada. Nevertheless, there are a few FX brokers that have set up their offices in Canada to cater to Canadian investors, and some of these branches are from established mainstream companies.

    How much is the Minimum Deposit with Canada Forex Brokers


    The absolute lowest amount to be deposited is $1, but it is recommended that around $250- $300 is deposited for the proper funds to test the broker and with Canadian traders, the leverage can go as high as 1:3000 offered by some brokers. Although with Forex.com the minimum deposit is $50. Traders are recommended to keep the leverage to a maximum of 1:200 and deposit slightly higher so that there is enough flexibility to work with.

    How Are Investors Protected?


    Canadian regulatory authorities have a highly descriptive set of guidelines that determine broker regulation, which is amended according to new findings and market conditions. Canada takes inspiration from other regulatory agencies from around the world to create a set of fair trading conditions that are suitable for both brokers as well as traders. Although Canada does not have a centralized regulatory authority for financial entities, the numerous smaller organizations are more than capable of dealing with financial irregularities, and financial malpractice can attract strict sanctions and substantial penalties.
    Of course, international and overseas brokers cannot be supervised or controlled, but the Canadian Government is proactive in ensuring that its citizens are made aware of potential scams that may lead to consumer abuse of theft. Therefore, Canadian regulators regularly seek out all instances of financial malpractices by keeping their investors informed about such occurrences from time to time. The Government also encourages investors to come forward with recommendations or concerns, so that the appropriate authority can take action if possible.
    Brokers that are regulated by Canadian regulators are required by law to be a member of the CIPF, which renders a further safety net to investors while trading with large sums of money. Therefore, when it comes to investor protection, Forex Brokers Canada do not disappoint.

    How much is the Minimum Deposit with Canada Forex Brokers


    The absolute lowest amount to be deposited is $1, but it is recommended that around $250- $300 is deposited for the proper funds to test the broker and with Canadian traders, the leverage can go as high as 1:3000 offered by some brokers. Although with the minimum deposit is $50. Traders are recommended to keep the leverage to a maximum of 1:200 and deposit slightly higher so that there is enough flexibility to work with.

    Investor Protection in Canada


    There is a set of guidelines which determines the regulation by which brokers must abide and this is modified and amended accordingly based on findings and updated conditions of the market. These guidelines are usually inspired by agencies that do regulation around the world to ensure the conditions of the trading activity are fair and are balanced between both traders and brokers.
    Even though a centralized authority for regulation does not exist for financial entities, the combination of the smaller sized organizations have proven competent and capable of handling fraudulent activities, financial malpractice and irregularities which tend to lead to stricter sanctions and more serious penalties.
    The Government of Canada is extremely active in making sure that the citizens are aware of the scams which will lead to consumer theft or abuse. The way the regulators handle this is by keeping tabs on and seeking out every single case of financial malpractice and informing the investors from time to time. In addition to that, it is encouraged by the Government of Canada for the traders or investors to send or come forward with recommendations as well as concerns so to ensure that the proper steps can be taken where possible.
    As a requirement by Canadian regulators, brokers must be a member of the CIPF (Canadian Investors Protection Fraud) – further ensuring safety to investors who trade large with large amounts of money.

    Switching to a Canadian Broker


    The CIPF compensation is only available for Canadian citizens, so if you are already trading at a broker you’re happy with, there will be no significance to moving to a Canadian broker if you are living outside of Canada. As a citizen of Canada though, you will enjoy several benefits that comes with being a part of CIPF, but as long as you are trading with smaller amounts of capital – it would be better to stay with your existing broker of choice.

    CFD Trading – a Closer Look and Understanding


    There is no standard contract for differences since each provider has their own policies and terms. There are certain similarities though – such as the basics, where a trader opens a position on a financial instrument with no expiry date. Once they close their position – that difference in price that exists between opening and closing price is paid out to the trader. Each broker has their own set of fees, commissions, withdrawal policy and management of the account.
    It is important to note that when a position is opened with a CFD, if that position is done when the market is closed – it is rolled over so any loss or profit is credited the next day. The calculation is always done in real time when it comes to the profit, loss and requirement of the margin of the trade and is fully visible to the trader. If or when the trader is down to a diminished account which is below the minimum marginal level, marginal calls are then possible and likely to be made.

    Factors for Choosing a CFD Brokers


    Regulation – it is always better to work with fully licensed and regulated brokers and avoid brokers that you are unknown or unregulated. Among the most well known regulators are CySec (Cyprus Securities and Exchange Commission)
    Trading Platforms – Mobile trading options that include Android and iOS are very popular as are platforms that include MetaTrader 4 (MT4), and WebTraders which are usually custom for each specific broker
    Variety of Options on your Account – Traders like to have flexibility and freedom to choose from a variety of choices including the maximum and minimum first deposits, educational tools and resources, personal customer support and service, good competitive spreads, high leverage and easy to use and varied payment methods
    CFD Trading Educational tools – Many advanced and cutting edge brokers today offer clients with market updates, trends, charting tools, financial insights, as well as webinars among a long list of tools to ensure their traders have what they need to trade successfully. It is imperative for a good CFD trader to understand the dynamics of the market and these are just a few of those elements that allow them to succeed.

    Keeping up with and avoiding scams by Forex Brokers


    The best way to avoid scams by Forex brokers is to focus on those who are fully regulated and governed by credible regulatory bodies.
    A few additional points to look out for as a trader that could mean a Forex broker is a scam would include –

    Website and broker look legitimate
    Promise of high earnings in a short time
    Not clear or ambiguous in how to trade and what to do
    Appearance of ads on TV, radio and the newspaper
    No indication of risk warnings regarding your investment and % of losses by traders

    By being consciously aware of the above alerts or flags – this is going to ensure that your investment will remain safe the majority of the time.

    Forex Terminology – Trading lots


    What is a lot size in Forex terms? When a trader makes a trade, he or she purchases a standard contract amount which is connected with leverage, also known as lots. There are 3 categories for Lot sizes which are:
    Standard – 100k units
    Mini lot – 10k units
    Micro lot – 1k unit
    If there is a leverage for example of 1:100 – it would require a deposit of $1000 to control a standard lot. If the leverage is 1:500 – you would need $250 to trade one a standard lot.

    A few Additional Details

    Payment methods used in Canada


    The most common way Forex brokers in Canada administer payments to their traders is through credit card which include Visa, Mastercard, Union Pay, Diner’s Club and others. In addition to this they also offer ewallets or online payment processors that include Skrill, Neteller, QIWI, Perfect Money and more. There are also options to be paid via a cheque and through a wire transfer.

    What would happen if A Trader Gets Scammed by a Canadian Broker


    Due to the very heavy regulation in Canada, the likelihood of of any fraud or scam is very low to virtually impossible. In the rare occurrence that this does occur where a trader is being misinformed or mislead, it would result in the broker losing their license, being issued a heavy penalty or fee, and reputation completely destroyed. While it’s not as satisfying to the person who may have been scammed or mislead, the penalty alone is a way to scare Forex brokers from attempting to do anything like this in the first place.