The trading climate for FX brokers in the EU is considered to be restrictive and complex at best. Limitations on leverage (1:30 in most cases) and higher liquidity requirements make it harder to set up and run a legitimate brokerage in the European Union.
Despite this, EU brokerages tend to have lower levels of risk. Europeans who have low-risk tolerance often stick to these agencies, therefore, but if you have higher risk tolerance and you want the chance of greater profits, there are international brokers you can choose from.
Why Choose an International FX Broker
There are forex brokers that operate partially in the EU and partially outside of it. These international brokers enjoy slightly less stringent requirements and limitations. For example, they are not limited to 1:30 leverage and can enjoy stop-out levels at or below 50%. These looser restrictions may increase the potential risk, but they also make it possible to enjoy higher profits.
This is the main reason that European citizens who are interested in FX trading choose international or non-EU forex brokers. However, there are other options if you want to enjoy looser regulations without giving up all possible protection.
These offshore and international brokers are authorized by governmental agencies, but they are largely unregulated and this lowers the protection that you can expect. If you are uncertain about this level of risk, you can also consider working with a Swiss agency or a brokerage located in New Zealand. These brokers are less restricted than EU traders but offer more stringent protection than offshore brokers.
How to Choose the Right International FX Broker
The forex brokers that Europeans choose to work with vary from highly regulated and protected to those that are largely unregulated and have little protection for consumers. There are two main factors that you should consider when choosing an FX broker to work with: risk level and instruments.
The risk level associated with a brokerage as a whole can be determined by its leverage, spreads, and protection for traders from government agencies. For example, will you be compensated if you become insolvent or the brokerage goes under? Considerations like these may not impact your day-to-day trading strategy, but they can have an impact on your experience as a whole.
The instruments used by a brokerage are those commodities and currencies that they allow traders to invest in or ‘bet’ on. Most forex brokers will offer the most common currency pairs. USD/GBP, GBP/EU, and USD/EU are some of the most common examples. However, it is also common for FX brokers to offer commodities such as metals, EFTs, and stocks.
If you choose a broker based on risk level and the instruments that best suit your ideal trading strategy, you will have a much better chance of getting the results that you are looking for. Don’t be afraid to make small trades on more than one platform before you commit to a specific choice.