Why Forex Trading Is Banned In Other Countries
Forex trading immediately associates your investment with risk of losing the initial capital since its either you make profit after opening a trade or you lose. Furthermore the influence if uncertain news event which increase volatility is very risk because when the volatility is too high sometimes the stop loss is not respected , hence an investor can be at risk of losing all funds invested.
Viewed as gambling
Many countries protect their citizens since they view trading as gambling reiteration. This can be true because if a layman is exposed to the markets without proper training, chances are they will gamble because most newbies think its a get rich quick scheme therefore greed leads to destruction. Gambling affects relationships, create mental health problems including depression and suicide.
Illusion of Control
Leverage helps you trade money that you don’t have. This exposes traders to high risk which can lead to lose of invested capital.
Government currency stability.
The availability of foreign currency devalues local currencies especially in countries where the local currency in pegged with another currency. If the local currency can not be used internationally for trading , therefore institutions determine the value which is risky since they may not need the local currency in doing their business outside the country. As a result countries resort to banning forex trading to avoid interference with their monetary policy.
In countries like the USA there is a misconception among unprofessional traders tat trading is banned however brokers are tightly monitored. The broker must obtain the appropriate license and have a security deposit of about $20 million. Thus why some brokers state that they are not operational in the US.
The sharia law prohibits giving for interest in any form. Thus the swap in trading is not in line with their belief. However Brokers have improvised and provided Islamic accounts which do not charge interest or commission to avoid violation of the sharia law.