As we mentioned in our piece about selecting a broker there are different regulations regarding forex around the world. There are some countries where is illegal, there are others where it is considered gambling and so on. Luckily, most of the times there is a way to trade for everyone. Just be sure to check every rule before you choose a broker and start trading with a live account.
Here is a list regarding the major areas where you will find differences:
- Availability of trading (is it legal or partly legal at least)
- The available products
- Tax issues
- The amount of leverage you can use
- Interest rates in Islamic countries
Apart from these, there some issues to be aware of, with probably the most important being the currency-risk itself. If there is no account available in your own currency, which is quite probable if you come from a smaller country, always pay attention to this. Currencies might move so much in weeks or a few short months that even a great trading performance can mean losses for you (or a weak performance can lead to profits for that matter).
Availability of trading, and products
USA and Canada
With a few exceptions, there is a possibility to trade forex everywhere but with limitations in some cases. Here at FXUniversal, the problem we run into the most is the issue of U.S. citizens. The problem for them is that it is legally hard to trade by a non-U.S. firm and most of the dedicated brokers are non-U.S. based or regulated.
The biggest drawback of a U.S. regulated broker is the leverage that is allowed to be used. For most traders this is a non-issue as 50:1 or even more leveraged strategies are rare, and most of the time really dangerous. An exception is Forex Broker Inc which accepts U.S. citizens and offers leverage up to 500:1. Check out our review to learn more about the broker. CFDs are also a problem. These versatile products are still not available for trading in the USA.
Canada also has strict regulations concerning leveraged products so it is the best to choose a broker that has a dedicated branch or office in the country (like Oanda).
The regulation which the broker operates under is also an important consideration for other countries as well. If you trade in Europe you should choose a broker that is regulated somewhere in the EU. Most of the brokers have at least a branch that is regulated by EU law so this shouldn’t cause a problem. Most of the best brokers are available for European traders.
The local regulation is also quite flexible and there are quite a few brokers that have dedicated Australian branches under local law. If you want you can also choose a native local broker that might have more pairs with the Australian Dollar and could also make tax matters easier. We recommend Avatrade from the local companies (you can find our review here).
Most countries don’t regulate forex trading but there some nations that prohibit trading 100% like Argentina and Venezuela. For other countries, any of our recommendations could work. Be sure to check out the product offerings, you might be able to find some local shares by some brokers besides your local currency.
As the population of Africa explodes and more and more people have savings in countries like Nigeria and Kenya a lot of attention has turned towards forex. Regulations are undeveloped, compared to some more mature countries in the region like South Africa. Because of this and the meaningful currency risk, it is wise to choose a well-established broker in the region that probably even has support for native languages besides offering the local currency for hedging purposes. A few good examples are Hotforex, IronFX, and IG Markets. You can read more about IronFX in our review.
What we said about African nations is also true for Asia, at least considering the demand for forex. Regulation is a different matter as there some really strict countries like India, China, Malaysia, and Singapore that make it very tricky to trade with currencies. The good news is that there are some companies that have extensive support for local traders. Plus 500, for example, has a wide selection of products and languages to choose from. Check out our review for details!
Those who want to trade under the special Islamic financial rules (no interest rates for example) there are numerous brokers with a dedicated account that comply with them. easyMarkets is has a good Islamic account with lots of options and great support as we described it our piece about the broker.
Taxes on forex profits differ country by country and the differences can be quite significant so if you turn a profit be sure to check local regulations out. It might even be helpful to get to know the rules if you have been a net loser as in some countries you can deduct your losses from certain taxes that you would otherwise pay. Another possibility is that you can carry your losses to the next year or years and pay less tax on your future profits. Either Way, you should be aware of the possibilities and duties you have—risking a fine usually doesn’t worth the risk.
There are a few simple rules that could help you immensely in dealing with taxes, here is a list to get you started:
- Keep track of your performance, especially if you have more than one account
- Know the different cost, like interest paid (and received), commissions, and other fees—they might fall under different ruling than losses
- Follow your transactions
- Mind your duties and deadlines, they usually align with your general tax filings
- And finally, don’t try to hide your profits
If you want to trade for a living these things should be a part of your business—not a lot to ask for such an exciting profession and such free life. If you are not sure that you want to handle these matters alone don’t be afraid to ask for professional advice as you might save a lot of time and money on the long run.
So as you can see most traders can find a good broker no matter where they are from. Get informed about regulations and options to avoid surprises before opening an account, and be sure to share your experience with us in the comments section!