Who are offshore forex brokers?
In a simple sense, an offshore forex broker is an individual or an institution that offers brokerage services that are typically outside the residential country of the trader. With these services, anyone from across the globe can get brokerage services. Moreover, the offshore forex brokers’ significant benefits are that they don’t have to follow stringent regulations and can operate freely to some extent.
Many forex traders generally interchange the terms unregulated and offshore. However, there lies a difference between both. The offshore forex brokers are not completely unregulated and generally abide by the rules. While on the other hand, an unregulated forex broker does not follow any code of conduct and operates without restrictions.
Why use offshore forex brokers?
As told before, many traders from across the world are opting for offshore forex brokers. Here are some reasons that make them highly famous in the trading world. Below listed are some merits that the traders derive by trading with offshore forex brokers:
Leverage is the general feature of the forex market that attracts traders worldwide. The offshore forex brokers offer excellent leverage, sometimes even ranging to 2000:1. Regulated forex brokers do not offer such high leverage as they have to abide by the leverage restrictions. Therefore, when a forex trader prefers to trade with an offshore forex broker, they can ideally access incredible leverage ratios.
- Risky financial instruments
The offshore forex brokers offer access to risky financial instruments, including CFDs. Therefore, the traders can become the owners without ideally purchasing the financial asset.
The regulated forex brokers generally limit the trading styles. While on the other hand, offshore forex brokers are open to several trading styles and patterns.
The offshore forex brokers typically offer tighter spreads to traders. Therefore, the overall trading cost for traders reduces drastically.
Demerits of offshore forex brokers
Other than the advantages, the offshore forex brokers are also prone to some demerits listed below:
The significant issue with offshore forex brokers is that there is no financial security. As the rules and regulations are fewer, the brokers do not offer a complete guarantee of monetary protection.
The offshore forex brokers are heavily prone to potential fraud. Hence, the potential frauds are pretty high in the case of offshore forex brokers.
The offshore forex brokers do not offer a complete risk graph. Therefore, the traders find it pretty challenging to understand the risk involved in any currency trading.
The offshore forex brokers do not have a redressal forum. Hence, in case of disputes, no third party exists who can resolve the issue.
The Bottom Line
Therefore, in a nutshell, it is ideal to mention that all that glitters is not gold, and the traders should make a wise decision when choosing between a regulated forex broker and an offshore forex broker.
