Offshore Brokers: new Phenomenon in Forex Trading
While most of us have sort of experience and knowledge about offshore banking the concept of offshore forex brokers is a phenomenon that has become quite popular in the past few months. Is it advantageous to take the professional help of an offshore forex broker in comparison to having a local broker? One of the biggest advantages in favor of offshore brokers is the international exposure and experience that these people possess. Knowledge about international markets and the various currencies is a definite plus factor.
As they trade for a wide range of clients from different countries they have adequate knowledge about taxation and other economic and political scenarios that could affect trading in forex instruments.
In most cases you end up saving a lot of money due to the different tax provisions from where the Forex Offshore Trading is done. Such places are known as tax havens and brokers usually prefer to operate from these places as it will benefit their clients.
The commission charged for this purpose is usually high but it is offset by the gains made due to the tax savings. Clients don't mind paying extra if the long term benefits are good.
There are some do's and don'ts that need to be kept in mind before one embarks on offshore trading with the help of brokers. Any sort of trade is accountable in every country it is done and forex trading is no exception. It would be advisable to check whether the broker holds the requisite license to trade in forex instruments.
There have been umpteen instances where the client money has vanished as due diligence was not exercised while choosing the broker.
When sending money to an offshore account care must be taken that it done only in your account and not that of a broker and you must maintain control over the account and its functioning at all times. The funds of the investors are usually held by a clearing house and this ensures greater accountability and transparency.
The one investment rule that most clients swear by and that a good broker advises is that once the money you have invested increases you should start taking out the principal amount that you had invested and operate the account with the profits made. This way the principal amount is safe and your risk is reduced.
Most good offshore brokers come with good references and it would be prudent on your part to check their anecdotes. You can call up friends or colleagues who have earlier had experience in dealing with such brokers and they could refer you to the best and trustworthy guys in the market.
The forex brokers act in good faith of the client and keep in regular touch with them keeping them updated about the various transactions.
Discuss with the broker the stop loss strategy that they practice and also agree on a guaranteed max drawdown limit. If you can get a contract in this regard then it goes on to increase the trust factor in the broker.
Get an offshore broker you trust and rake in the profits through forex trading.