Generally, those interested in trading stocks, commodities, forex, and other assets are advised to only consider working with a broker that operates in a regulated market.
The advantages of that speak for themselves. Each broker is closely watched and monitored by the presiding authority and has expected standards of service and quality to adhere to. Often, brokers in said regulated markets can also offer higher liquidity and tighter spreads due to the volume of money invested.
That said, there are perks to trading with offshore, overseas brokers, and the decision you will have to take is based upon the unique conditions that you look for when buying/selling an asset.
Do you want unparalleled levels of leverage to maximize your position? Do you want a more comprehensive selection of investable assets to utilize? Do you want to take advantage of trading options like scalping and hedging? These are just some of the benefits that an overseas broker can bring.
But aren’t all offshore brokers scams?
This is a popular misconception that does the rounds amongst those who prefer Chinese whispers to concrete facts.
Yes, some overseas brokers are out to make a quick buck, and they do so in nefarious ways – but these scams are often easy to spot when you know how/what to look for. A quick email or phone call requesting information on how the broker protects their users’ funds, and documentary evidence of that, is usually enough for your correspondence to be routinely ignored by a scam operator.
But there are plenty of offshore brokers that do implement stringent security and financial protection methods. One firm, TrendsTurbo, uses segregated accounts with several major financial institutions – the upshot is that you have the peace of mind of knowing your money is safe should the broker experience cashflow issues.
Most importantly, this is a technique deployed by regulated brokers – so it just goes to show that an offshore broker is willing to go the extra mile to protect their clients despite the rumors that all such firms are scams.
There are overseas brokers that implement the latest in encryption technologies to keep transactions and your personal data secure and that follow the necessary KYC (Know Your Customer) verification processes. They often allow you to use the most recognizable and trusted payment methods, which affords traders an extra layer of trust and security.
Once upon a time, offshore brokers were a haven for money launderers and those looking to operate in international markets without having to prove their identity. But those days are long gone, and now traders can utilize the best overseas operators and still enjoy the basic foundations of security, assurance, reliability, and quality while taking advantage of other perks of the broker’s geographic location.
The best of both worlds
There are some considerable advantages to trading with an overseas firm instead of a broker that is regulated by a tighter regulator like the stringent Financial Conduct Authority or CySEC.
For the most part, you can expect enhanced leverage with offshore brokers – some will hand you as much as 400:1 in certain markets. The benefit of that, of course, is that you can maximize a position you have identified as profitable when compared to the much lower levels of leverage available in the regulated sector.
Often, the operating costs for an overseas broker are lower than those in a regulated environment – after all, they have expensive licenses to apply for. These savings can, and often are, passed onto clients in the form of lower trading fees or, in some cases, zero commission charged on executed transactions.
There is a perception that overseas brokers somehow offer an inferior product. One way you can check this is to research which trading software platform(s) they offer – can you access MetaTrader? Do they have both the desktop and mobile versions? If the answer to both questions is yes, you are clearly no worse off than when compared to traditional brokerages.
This is not designed to be a ‘puff piece’ on offshore brokers, and there are areas in which they can improve. Some will have chasm-like spreads due to a lack of access to liquid markets, and that is something for traders to consider – a quick bit of research will reveal the kinds of spreads you can expect for specific assets at any given time of the day.
But as we have learned, there are numerous advantages to trading with an overseas broker – write them off at your peril.
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