16 December 2020 | AtoZ Markets – Forex trading in Canada is huge. The Canadian dollar has growing global importance and has a correlation with the United States' economy and oil prices. Canadian traders looking to learn how to trade forex have come to the right place.
In this Canadian forex traders guide, we'll find out whether forex trading is legal in Canada. If you are also wondering how to find the best FX broker and if forex trading is taxable in Canada, read on as you'll find satisfactory answers.
Before answering all these questions and more, let us first understand what forex trading is in a general sense.
What is forex trading in Canada?
Suppose that you live in Canada and wish to visit the Louvre or the Louvre Museum the next spring. If you take your Canadian dollars to France, will you be able to visit the Louvre? Definitely, not. Even though you have money in your hand, you don’t have the currency acceptable in France. You will need French euros to enter into transactions in France. That being the case, you will have to exchange your Canadian dollars into Euros with the help of a reputable broker.
That said, forex trading refers to the trading of foreign currencies. Similarly, if you want to buy an authentic Nigerian Adire fabric when you visit Nigeria, you cannot pay using your Canadian dollars. You will need the currency of Nigerian naira to make payment for buying the fabric. This kind of currency exchange is what we know as forex or foreign exchange. Meanwhile, trading various currencies means forex trading.
Having said that, is forex trading in Canada legal? Read on!
Is forex trading legal in Canada?
Yes, forex trading legal in Canada. However, some other countries do not allow or consider forex trading to be legal due to several reasons such as restrictions on the usage of credit cards, ban on domestic banking, etc. It is essential for an investor to check the laws of the concerned country if he wants to partake in forex trading activities.
Some brokers may prove with the help of evidence that forex trading is legal in that particular country. However, the broker is not responsible for the legality or illegality of the forex trading activities performed by the investor. Hence, the investor is entirely responsible for checking the legality of forex trading in that country.
In Canada, forex trading is legal and one can conduct forex trading activities subject to certain regulations.
Is forex trading legal in Alberta?
While forex trading is legal in Alberta, one must qualify as an “accredited investor” whether the broker is regulated by the IIROC or not. This is kind of like qualifying as a professional trader in Europe because you will have to meet one or more of the following conditions:
- Are a financial institution including a bank
- Have held a minimum net income of $200,000 in the past 2 years
- Hold a minimum of $1,000,000 in a financial portfolio
- Have invested at least $5,000,000 in properties
Remember, you don’t need to meet all of these criteria to qualify as an investor in Alberta, one will do.
Is forex trading regulated in Canada?
If you live in Canada and want to trade in the forex market, be aware that Canada has one of the most heavily regulated Forex markets in the world. This regulation differs from province to province, thus giving traders a secure trading environment.
The following are the main Canadian regulatory authorities in charge of regulating brokerage firms:
- Investment Industry Regulatory Organization of Canada (IIROC)
- Financial Transactions and Reports Analysis Centre of Canada
- Mutual Fund Dealers Association
- Canadian Securities Administrators (CSA)
- Financial Services Commission of Ontario
- Alberta Securities Commission
- Ontario Securities Commission
- British Columbia Securities Commission
- Autorite des marches financiers (Quebec)
- Office of the Superintendent of Financial Institutions
- Canada Revenue Agency
Other regulatory authorities in Canada include:
- Commodity Futures Trading Commission (CFTC)
- National Futures Association (NFA)
- Canadian Investor Protection Fund (CIPF)
However, know that regulation also limits your ability to trade forex using high leverage ratios. Despite that, you can still take advantage of currency market movements by forex trading in Canada. You need a viable strategy, a sound trading plan, and a good online forex broker.
Canadian forex traders are also free to trade with any kind of brokerage house as per their needs and preferences. This is an important advantage of forex trading regulators in Canada.
Now that we've known that forex trading is legal and regulated in Canada, let's help you see the best forex brokers in Canada.
Forex brokers accepting Canadian clients
It might interest you to know that there are different forex brokers accepting Canadian clients. There are many brokers in Canada like Oanda and Forex.Com, and they all have their advantages and disadvantages. Whether you are looking for good bonuses or just an excellent all-round experience you are sure to find the perfect broker for you.
It’s an important decision, so you will need to establish your priorities and find the broker who ticks the most boxes for you. Many Canadians find it reassuring to use a local broker. The fact that they are a "homegrown" brokerage firm, licensed and regulated in the country acts gives assurance that the broker is reliable. However, there are some regulated and reputable AtoZ Markets approved forex brokers that offer their services to Canadians. These are equally as beneficial to trade with.
International brokers that accept Canadian forex traders
The brokers below represent the best forex brokers for trading in Canada.
HYCM has been around since 1977 and are consummately regulated by both the FCA and CySEC in providing the most trusted trading available as a European broker. You will be impressed to find an accessible minimum deposit of $100 available here and a range of more than 100 markets to trade in.
The costs too are very competitive with spreads at HYCM starting from just 0.2 pips and fixed spreads from 1.8 pips also offered. This displays excellent flexibility and value in equal measure from the longstanding broker and a reason why many traders opt to open an account here.
FP Markets was established in 2005 and is regulated by the Australian Securities and Investments Commission (ASIC), offering segregation of client funds and top tier liquidity. FP Markets is a group of companies that includes First Prudential Markets Ltd which is authorized and regulated by the Cyprus Securities and Exchange Commission.
This broker also offers a range of education and market analysis resources through the Traders Hub which includes technical analysis and fundamental analysis articles and videos, as well as, trading ebooks and video tutorials. Users can access live support via telephone, email, and live chat 24 hours a day, 5 days a week. Canadian forex traders can open an account with them and enjoy these benefits.
Plus500 is a reputable forex broker with over a decade of experience. It offers a great range of account types, quality research tools, and extensive educational materials.
Our Plus500 review team found the broker to trustworthy and accomplished. Some of the available account types have very low minimum deposit limits, making this broker perfect for beginner traders. Plus500 also offers great bonuses and a rewarding loyalty program.
Additionally, opening an account with Plus500 is as easy as possible for Canadians forex traders. You can trust us to never rely on third-party opinions, as our objective is to ensure that Canadians have the information they need to choose the best broker.
How to start forex trading in Canada
If you’ve never traded, getting started in the forex market is relatively easy despite the strict regulatory restrictions in Canada. To get started in forex trading in Canada you can follow the 6 steps outlined below:
- Obtain a relatively modern device connected to the internet.
- Find an online forex broker that accepts clients from Canada.
- Open a margin account with that broker.
- Deposit funds using a payment method the broker accepts.
- Download the broker’s trading platform or one you can use with that broker.
- Make your first trade.
Forex trading Canada tax
Is forex trading taxable in Canada? While most countries tax forex profits as income, in Canada, it is subject to Capital Gains tax. Usually, this means that 50% of the profit is taxable and the other 50% is not. However, this is subject to change as with any tax laws.
If you are unsure then it is best to seek the advice of a financial expert who will be able to help. Usually, you can print out a copy of your trading history and take it to an accountant who will have experience in this field.
Is forex trading in Canada worth it?
Trading forex requires considerable knowledge of the market, a viable trading plan, and the discipline to stick to your plan, as well as adequate funding for your strategy. If you meet all of those requirements, then your physical location typically makes very little difference.
Also, due to the IIROC’s stringent requirements for clients and brokers that accept Canadian clients, you’ll enjoy a high level of security for your funds. If you think forex trading seems right for you, then just select a reputable forex broker that takes Canadian clients and approach them to open a trading account.
Think we missed something? Let us know in the comment section below.