Forex Trading Laws in New Zealand.

[Thos]

Hi there,

Can someone clarify the legal issues around trading for friends?

Also is there a difference legally between trading for offshore clients or local clients?

At what point is a trader forced to apply to be a Broker to remain within the law.

I have been dabbling for about 5 years, and now have a system for manual trading good enough to earn a good return but I find it hard to get good answers about how regulated things are, what you can legally do and what you cant.


Many Thanks for any comments.

Thos.

[stoploss]

Not sure about the legal ins and outs . However trading for friends is very risky . You can't win all the time and they don't understand trading losses , so you risk losing your friends .
If you are making a good return , with the leverage available in FX you will be able to build up a sizeable bankroll in a short time . So no need to take friends money in and risk their cash and your friendship .

[Thos]

Hi there,

So far 70 odd views and only one reply - very puzzling.

Having a portfolio of clients would seem to me to be quite reasonable...

Are traders doing this informally and staying under the radar?

Have I raised a topic no one wants to talk about?

Has no one really cracked the beast, so they have nothing to offer?

When I talk to "Officialdom" they seem to classify FOREX as FUTURES and want a sizeable fee to become a registered Broker if you start trading for others.

What is going on... ???

Cheers,

Thos.

[Jay]

Would you be classed an as adviser and come under FMA rules?? But may get away with it if all under your own name, however, still need to look out for what stop loss has said.

It is not a similar way to how PIE funds started??

[Thos]

Hi there,

Thanks Stoploss and Jay for your responses.

I am guessing that a good percentage of successful traders extend beyond trading for themselves.

Jay Said "Would you be classed an as adviser and come under FMA rules?? But may get away with it if all under your own name..."

The setup can be structured in several ways.

One way is to have the client open an account with a broker and give you the legal right to trade the fund. If this is done without disclosing the trading method, it is hard to see how any financial advice is given.

If this account is off shore, would profits only be subject to tax if they were bought back onshore.

I am sure that many serious traders have done this. I would however like to know if it is within present law...

Cheers,

Thos.

[Thos]

Hi there,

Lots of helpful responses thanks...

Newguy said "If you have such a successful/robust system, why would you share it with others (friends or otherwise)?

me - Interesting comment... why would you not???

Most forex platforms allow leverage of 100:1, so I really don't see the need to be using other peoples' capital.

me - It is not uncommon for traders to live off the IB fees of multiple clients.

"I also liked KW's comment about allowing others to follow you online. Seems like a very easy way to achieve what you want without all the hassle...."

me - yes this is a sound option but I think it would still require you to be registered because they are following your financial advice.

Also, if you really are serious about this, go and talk a registered/qualified financial professional. Don't rely on advice given to you by randoms on the internet. Seriously.

me - Of course but raising the matter for discussion can benefit many and raise awareness of the issues...

OK so trading outside ones personal fund is now tightly regulated is seems and I will confirm this with professional advice.

Thanks,

Thos.

[stoploss]

Hi there,

Lots of helpful responses thanks...

Newguy said "If you have such a successful/robust system, why would you share it with others (friends or otherwise)?

me - Interesting comment... why would you not???

When everyone starts using your system , its advantage over the market is lost because everyone is trying to do it . Sure there are big markets out there, but if you are all trying to get in on the same trade slippage will ensue ....

[Thos]

Our of interest, would you be willing to share some very high-level information about your system? For example:

what chart timeframe to you trade on?
what indicators do you use to time entries?
how long are you in each trade on average etc?

No worries if you don't want to share, but I've analysed and written a lot of algos for forex and none work all year round....

Hi There,

OK I wouldnt call myself an experienced trader but have been assisting with testing and developing EA's for about 5 years and started learning about forex about 8 years ago.

My present method is pretty simple and is yielding on average between 1% and 2% per day but it is early days.

I enter on the 15M chart consistent with the H1 and D1 trend.

Pairs are chosen based on volatility and trend and the entries are timed using the behaviour of multi. moving averages.

There is a bit of intuition going on and taking account of support and resistance.

Trades can be open from hours to several days typically.

Discipline is essential and I have a lot to learn.

I think there is a lot of myth out there around forex, and conspiracy theories to cover for the inadequacy of traders IMHO.

My mentor told me not to trade until I doubled a demo account. I managed this in one month some years back using COG. Then the market changed and I had to abandon the approach.

So there you go - I guess you give me about two out of ten.

Thanks for your help.

Thos.

[Xerof]

Thos,

FX trading using CFD's is covered by legislation under the Securities Act, is considered to be futures, and therefore needs a license from FMA. Don't bother applying as you won't get it if you don't have formal experience, a lot of capital, and want to take money off the public.

If you did manage to secure a license, good luck with the trading - I hope you are one of the <5% who actually profit consistently.

I have done it, and wasn't one of the 5%....

I used a company structure, with shareholders, all of who were close business associates, so no license or prospectus needed. I dont know for certain, but I think it's tighter now than ever before.

find a regular job would be my honest advice

[Thos]

No offence, but have you actually ran any of the EAs on live trades? The backtests are totally flawed, and the tick data that most brokers provide is rubbish. In my humble opinion, trading on the 15 minute chart is fraught with issues. You are basically trading on the noise surrounding longer term trends. best of luck, and no offence, but please be very careful about spending other people's money on such elementary trading systems.

I have written 100s of EAs, some incorporating over 10 different indicators and more than four time periods. Most worked incredibly well in back testing, but never lasted that long in real trades.

Feel free to PM if you want to bounce anything off me. otherwise, good luck!!!

Yes agree that good tick data is difficult to find and backtesting can be deceptive...

At the present my trading is all manual, and yes M15 is somewhat fast for normal trading.

May PM you at some stage if issues arise thanks...

Thos.