Forex Trading in Dominica

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Contributor, Benzinga
September 24, 2020

Those with some risk capital who are interested in getting involved in trading the forex market can now operate via online brokers that accept residents of the country as clients. Its relatively low barrier to citizenship (U.S. $100,000) also allows foreigners to purchase citizenship status, which can allow you to enjoy the Caribbean beauty of the country while trading currencies.  Read on to find out how you can get started as a retail forex trader. 

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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WorldAtlas.com

If you are based in Dominica, do not expect any regulation of local forex brokers from the island country’s Financial Services Unit. According to OID, a Dominica-based registered agent and corporate services provider for international clients, the “laws of the Commonwealth of Dominica do not recognise forex services as a separate line of business and as a result, there are no laws, statutory rules or orders, code of conduct, licensing provisions or consumer/investor protection schemes in place.” That means you are probably going to be safer trading forex via an international broker that operates in a well-regulated jurisdiction with oversight from a reputable regulatory agency. 

Get Started with Forex in Dominica

Dominica does not extend licenses to any forex broker, so watch out for any broker saying that it has one. Because of the island’s location, there is no shortage of brokers willing to accept clients from Dominica. Proceed with caution and follow these tips to ensure the safety of your personal and financial information.

  1. Your web connection: As an island, the internet is sometimes spotty. You might not be able to trade from a remote beach sipping a mai tai, but this is not recommended anyway. Make sure that when you trade, you have a strong internet connection that does not unexpectedly drop out on you.
  2. Your broker: Again, there is no broker with a license to do business in Dominica. Do not do business with any broker saying the opposite. You should be able to find an international broker regulated by a major regulatory agency. This is highly recommended.
  3. Your trading account: You can open up a trading account at the broker you have chosen by visiting its website. Once you transfer your money into your trading account at your broker, there is very little protection for it from the Dominica government. Look for protection from offshore financial authorities and the policy and reputation of your broker.
  4. Your trading platform: Most online brokers support several trading platforms, including popular 3rd-party platforms like MetaTrader, that you can use to execute forex trades when online. You need a platform that has the functionality you require and that your internet connection can handle.
  5. Your trades: When you have everything that you need to trade forex set up and working, you can enter your first trade in the forex market.

Dominica Forex Trading Strategies

There are no guarantees when you trade forex, and the only consistent success comes from great planning, fast execution, having a correct market view and managing your money appropriately. Here are several trading strategy types that may suit some personalities better than others, so choose the one that fits you best.

The Day Trader

As the name implies, day traders typically close their positions out before the end of any given session and so do not hold overnight positions. Day trading requires a decent internet connection since you often monitor the market closely and may need to move in and out of trades frequently. You will be competing against traders around the world using sophisticated technologies, so make it a point to understand your trading tools and indicators.

The Swing Trader

Swing traders make money both from trends and corrections, often by following the signals of a market momentum indicator. The direction of a market swing can shift over the course of days or weeks, so swing traders often hold overnight positions. Swing traders need to know how to interpret momentum indicators to warn them of these changes for the best results.

The Position Trader

If you would rather analyze long-term economic policy than focus on short-term exchange rate swings, then position or trend trading may be for you. You may be holding a single position for months or years at a time until an exchange rate conforms to your expectations, so be prepared to wait for any profit you might make. When you are successful in calling the market, this profit can be substantial and will often be protected with trailing stops. 

Forex Trading Example in Dominica

Dominica uses the East Caribbean Dollar (code XCD), although forex traders will typically want to operate in pairs involving more actively traded currencies like the USD, EUR, GBP or JPY. As an example, the USD/JPY bid/ask spread is 106.02/05 at your online broker. You place an order to buy 100,000 USD versus the JPY at 106.05. Your online broker allows you to use leverage of 100:1 in that currency pair, so you can hold a $100,000 position with just $1,000 in your margin account. 

After 10 hours, the USD/JPY exchange rate is now trading at 106.20/23 and you decide to close out your position at 106.20 for a 15 pip profit. That trade will net you ($100,000 x 0.15) = 15,000 JPY or $141.24.

Making Money with Forex in Dominica

Your trading plan will structure the way that you trade forex. Find the methods and trading tools that work best for you, and develop the discipline required to stick to your plan.

  • Going short: You will need a margin account with your online forex broker to trade currencies. Going short a currency pair means selling the base currency and buying the counter currency. 
  • CFDs: Contracts for differences — CFDs — can allow traders to operate in a wider variety of underlying assets than most traditional forex brokers offer. There are plenty of well-regulated CFD brokers who will accept clients from Dominica, so if you want to trade assets other than currency pairs, then consider selecting one of them.
  • Binary options: Binary options are exotic derivatives that allow the holder to pay a fixed premium in return for a fixed payout if a certain prespecified market condition is observed at or before expiration.  

Best Online Forex Brokers in Dominica

Choose wisely from among the regulated forex brokers listed here. Vet them for compliance with their local regulatory bodies, their reputation with clients and their proper treatment of deposited funds by segregating clients funds from their own.

  • Forex.com
    Best For:
    Forex Trading in and Outside the U.S.
    securely through Forex.com's website

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

    The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account

  • Plus500 Forex
    Best For:
    CFD Trading for Mobile Users
    securely through Plus500 Forex's website
  • City Index
    Best For:
    CFD Trading
    securely through City Index's website

    Investors should keep in mind that 70% of all CFD accounts lose money.

  • FxGlory
    Best For:
    Fixed Spreads
    securely through FxGlory's website
  • AvaTrade
    Best For:
    Non U.S. Forex & CFD Traders
    securely through AvaTrade's website
  • eToro Forex
    Best For:
    Copy Trading
    securely through eToro Forex's website

    CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Forex Terminology

Look over these terms, the basic concepts of the forex market.

  • Pip: The minimum exchange rate movement, typically 0.0001 for most currency pairs. 
  • Lot size: A standardized trading amount. Usually 100,000 base currency units at most online forex brokers. 
  • Orders: An instruction given to your broker to execute a trade on your behalf. 
  • Calls: Options that give you the right to buy an asset at a given price on or before an expiration date. Currency options are both calls on one currency and puts on the other since currencies trade in pairs. 

Does Trading Forex from Dominica Make Sense?

The Nature Isle of the Caribbean, as Dominica is called, provides a stunning backdrop for its tourists and residents. Due to its unregulated forex market, beware of any local brokers promising you easy profits trading forex with high leverage. Take heed of the government warnings to watch out for “too good to be true” schemes and scams.

Since most retail forex traders lose money, make sure you engage in careful planning and have a winning strategy, the right infrastructure and an account with a reputable well-regulated broker before trading currencies. If you want the latest information to aid your forex trading strategies, bookmark this website and come back often.

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.