What is International Trading?
You are trading from a known geographical zone to a relatively unfamiliar geographical zone. From a zone wherein you get daily feedbacks about the economic situation, to a zone about whose economics, you don’t have much expertise. In the area of international trade an investor mainly depends on the advice of his stock broker. Many online brokers let you trade directly with a number of international exchanges and you can hold cash in some of the major currencies. They also offer you real time foreign exchange facilities.
International Trade—its working:
Procedure-wise, the online working for domestic and international trade is more or less the same. Go to the “Placed an Order” page and peruse the website that you choose. Decide which market you would like to invest and the browser will take you to the concerned options on that page to help you to place an order for your trade.
The plus points of International Trading:
- Trade directly with many international exchanges.
- Your broker will have the multi currency Cash Management Account. With this arrangement you are enabled to hold a specified number of major currencies: Some of them are: US Dollars (USD), UK Sterling (GBP), Swiss Franc (CHF) & Singapore Dollars(S$) etc.
- Facility of trading through one consolidated account.
- No stamp duty as for North American and European markets.
- Trading can be extended beyond the market hours of a particular exchange, as you have the benefit of different time-zones.
- The benefit of usual stop loss arrangements, as per the instructions of the investor.
- The main point is, an investor can create a geographically diversified portfolio, to avail benefit from different countries as per the economic conditions and the possibility of future developmental activities there.
The negative aspect—full of risks:
- Comparing to the domestic markets, it is difficult to gauge the international markets. Foreign contracts are affected by fluctuations in foreign exchange rates. A profit-yielding contact at the time of signing may turn into a losing trade, by the time you execute the order due to such fluctuations.
- No guarantee exists as for the performance of investment products. Due to wild variance in the foreign exchange rates, forget profit, your invested amount may be at stake. You do not have any remedy to tackle such an eventuality, except suffer losses.
The procedural aspect:
- Do all transaction, whether at the learning stage, or as a seasoned trader, by obtaining guidelines from a qualified financial adviser.
2. You are eligible to trade on international exchanges with a Trading ISA and/or SIPP Account or a simple Trading Account.
3. As for US stocks Form W-8BEN needs to be furnished, before commencing the trade. This will enable you to receive tax relief on income received by you from US stocks, in tandem with the US tax treaties.
Online international trading has made it possible for the intelligent and bold investors to cash on the certainties & uncertainties of a number of stock exchanges all over the world. For those who are genuinely interested in international trade, that is a 24×7 business due to different time-zones. Lot of research and study is needed for an investor before venturing out to this field, where the risk-scope far outweighs the profit-scope.
Advice to learners of international trade:
Study a good website like that of London Stock Exchange. You are entering into the wonderland of international trade. The attractions are many; the pitfalls are treacherous. Research well, the companies that you propose to invest and then engage a brokerage firm. You may be a versatile computer operator; thorough in internet syllabus, but that facility is only an instrument. It does not give you promise of profits. Oh, yes the legitimacy of the brokerage firm that you have decided to engage is even more important. Generally brokerage firms charge a fixed monthly fee, in addition to $ 3 to $20 per trade.